HONG KONG, Dec. 1 (UPI) -- The International Monetary Fund on Tuesday formally approved China's currency as one of the world's elite monies -- a sign of improving financial times in the world's most populous nation.
With the IMF's approval, the Chinese renminbi (RMB) joins four other currencies -- the U.S. dollar, British pound, the euro and the Japanese yen -- on the list of the world's most powerful money, classified under the Special Drawing Right designation.
The Executive Board of the IMF evaluates currencies for inclusion in what's called the SDR basket every five years.
"A key focus of the Board review was whether the Chinese renminbi met the existing criteria to be included in the basket," the IMF said in a statement Tuesday. "The Board today decided that the RMB met all existing criteria and, effective Oct. 1, 2016 the RMB is determined to be a freely usable currency."
"The addition and inclusion of the renminbi in the SDR basket of currencies is a recognition of the significant reforms which have been conducted of the significant opening up of the Chinese economy," the agency's managing director, Christine Lagarde, said. "That is clearly symbolic, in a way, of all [China's fiscal] reforms."
Analysts say that for years China has been making strides in the global economy, emerging as one of the world's most powerful emerging markets.
"The inclusion of the RMB will enhance the attractiveness of the SDR by diversifying the basket and making it more representative of the world's major currencies," the IMF statement added.
To meet the SDR requirements, China was forced to relinquish some of its control over the renminbi -- a move that ended with a sudden devaluation of the money that impacted global markets in August. The changes could spark fresh volatility at a time when its economy is already slowing, The New York Times reported Tuesday.
With its inclusion of the RMB in the SDR basket, the IMF is effectively declaring the Chinese currency as safe and reliable.
Beijing has been working for years to achieve SDR designation for the renminbi, which analysts say could challenge the U.S. dollar as one of the world's top currencies.
Tuesday, the U.S. Department of the Treasury said it approved the IMF's inclusion of the RMB in the Special Drawing Right basket.