No impacts on Vietnam as China’s yuan joins IMF basket: experts
No impacts on Vietnam as China’s yuan joins IMF basket: experts
The recent admission of China’s yuan into the International Monetary Fund’s benchmark currency basket will have no immediate impact on Vietnam, experts have said.
It is not necessary to switch from U.S. dollars to the Chinese currency for payments made in business, nor savings deposited by members of the public, according to pundits.
On Monday, the IMF officially decided to add yuan to its Special Drawing Rights (SDR) basket alongside the dollar, euro, pound sterling and yen, marking an important milestone in China's integration into global finance, according to Reuters.
The SDR determines the currency mix that countries receive when the IMF disburses financial aid, Reuters said on Monday.
The admission of yuan to the basket is therefore seen by global analysts as a significant benchmark in China's push to internationalize its currency, which will likely increase demand for it.
“The IMF’s move illustrates that it considers China a powerful economy that meets all criteria to join the SDR,” Truong Van Phuoc, deputy chairman of Vietnam’s National Committee for Financial Supervision, told Tuoi Tre (Youth) newspaper on Wednesday.
China will take advantage of the chance to strengthen its currency on the global market, but Phuoc said any plan will not have short- or medium-term impacts on Vietnam’s economy.
“The current yuan is a lot weaker than the other currencies in the SDR basket,” he explained.
The U.S. dollar currently makes up 41.73 percent of the basket, followed by the euro, accounting for 30.93 percent.
The share of the Chinese currency is 10.92 percent, compared to 8.33 percent and 8.09 percent of the Japanese yen and pound sterling, respectively, Phuoc elaborated.
“The joining of the yuan to the IMF basket will not encourage Vietnamese businesses to switch to paying in the Chinese currency, as the greenback is still the strongest currency in the short and medium term,” he said.
“China has succeeded in its bid to have the IMF recognize the strength of its currency, but it remains to be seen how the country can persuade the whole world to switch to using the yuan.”
However, the expert also noted that Vietnam should closely watch over monetary policies in China in the short term to be able to avoid possible negative impacts.
Most payments in dollars
Local business said it is unlikely that the yuan will replace U.S. dollars in trade transactions, despite the new status of the Chinese currency.
“Businesses get used to paying in U.S. dollars, despite its instability recently, and it is therefore hard to switch to another currency,” Duong Chi Thanh, deputy general director of Vinh Tien JSC, a major Vietnamese papermaker, told Tuoi Tre.
Vinh Tien Co. has recently bought a $60,000 Chinese-made machine, and paid in U.S. dollars even though the supplier is in China.
Thanh said businesses will continue to complete payments in “whatever currency that brings the fastest and most effective results,” not just U.S. dollars or Chinese yuan.
Similarly, the general director of a shoemaker in the southern province of Binh Duong said most of his material suppliers in China, South Korea, Taiwan, and Hong Kong accept payments in U.S. dollars.
“Businesses everywhere love to pay in dollars,” he said.
“So we may have to take some time to consider whether we should switch to the yuan or other currencies.”
