What Will It Mean If the Yuan Gets Reserve-Currency Status?

• At least $1 trillion of global reserves may migrate to yuan
• Successful bid would boost Xi's economic reform efforts
• International Monetary Fund representatives have given Chinastrong signals that the yuan is likely to soon join the fund’s basket of reserve currencies, known as Special Drawing Rights, Chinese officials with knowledge of the matter told Bloomberg News this week. Here’s a primer on what that means.

  What is a Special Drawing Right?

  The fund created the SDR in 1969 to boost global liquidity as the Bretton Woods system of fixed exchange rates unraveled. While the SDR is not technically a currency, it gives IMF member countries who hold it the right to obtain any of the currencies in the basket -- currently the dollar, euro, yen and pound -- to meet balance-of-payments needs. So the ability to convert SDRs into yuan on demand is crucial. Its value is currently based on weighted rates for the four currencies.  Read more