Lagarde said the yuan’s inclusion in the basket was expected to help China open up further to the world economy.

“The continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy,” she said.

The unexpected devaluation of the yuan last August received good marks from the IMF as it expanded the currency’s movements based on market forces.

In addition, Beijing last Wednesday announced that an initial group of foreign central banks has been allowed to enter the Chinese currency market, which likely will promote further internationalization of the yuan in global trading.

IMF members can use the Special Drawing Rights basket to obtain currencies to meet balance-of-payments needs. The Fund also issues its crisis loans -- crucial to struggling economies like Greece -- valued in SDRs.

The yuan’s entry into the basket takes effect on October 1, 2016.

But China is expected to face challenges with the yuan included as an IMF reserve currency.

It puts the Bank of China under pressure to provide more transparency in line with its peers, such as the Federal Reserve and the European Central Bank.

“If part of their policy is to gradually liberalize the capital account and the financial sector, this is setting in motion a process of opening up that cannot be reversed,” Angel Udibe, a financial markets expert at the Peterson Institute for International Economics, told AFP.

“It really make the case at home that they need to continue with the process of liberalization.”

The composition and weightings of the SDRs basket are reviewed every five years. The last time the currencies in the basket were changed was in 2000, when the euro replaced the German deutschemark and the French franc.

The value of the SDR is based on a weighted average of the currencies in the basket. With the inclusion of the yuan, the dollar’s weight in the new basket will be little changed from its current 41.7 percent. The euro will be

30.9 percent, the yuan 10.9 percent, the yen 8.3 percent, and the pound 8.1 percent.

The inclusion of the yuan came with the support of the United States, the IMF’s largest shareholder.

Until recently Washington accused China of keeping the yuan artificially low to gain a trade advantage. But in October the US Treasury Department softened its tone, saying that after Beijing’s moves to loosen controls, the yuan “remains below its appropriate medium-term valuation.”

Still, the IMF decision risks angering some lawmakers in the US Congress amid fierce maneuvering for the 2016 presidential election.

“With this decision, the IMF is choosing to reward China’s currency manipulation instead of combatting it,” said Senator Chuck Schumer, a New York Democrat and longtime China critic.

“This decision is an affront to the millions of US workers who have lost their jobs at the hands of China’s rapacious trading practices, and sends a terrible signal to the rest of the world that currency manipulation is acceptable behavior in the eyes of the IMF.” (AFP)