►Finance and economics: The yuan joins the SDR Maiden voyage


  Reserve-currency status might make for a weaker yuan.


  PASSING through the Suez Canal became easier earlier this year, thanks to an expansion completed in August.


  Now it is about to become a little bit more complicated.


  Transit fees for the canal are denominated in Special Drawing Rights, a basket of currencies used by the International Monetary Fund (IMF) as its unit of account.


  This week the IMF decided to include the yuan in the basket from next year, joining the dollar, the euro, the pound and the yen.


  If lots of things were priced in SDRs, the IMF's decision would have forced companies around the world to buy yuan-denominated assets as soon as possible, to hedge their exposure.


  That would have prompted China's currency to strengthen dramatically.


  But few goods or services are priced in SDRs.


  Instead, admission to the currency club is significant mainly for its symbolism: the IMF is lending its imprimatur to the yuan as a reserve currency—a safe, liquid asset in which governments can park their wealth.


  Indeed, far from setting off a groundswell of demand for the yuan, the IMF's decision may pave the way for its depreciation.


  The reason is that the People's Bank of China (PBOC) will now find itself under more pressure to manage the yuan as central banks in most rich economies do their currencies—by letting market forces determine their value.


  In bringing the yuan into the SDR, the IMF had to determine that it is “freely usable”.


  Before coming to this decision, the IMF asked China to make changes to its currency regime.


  Most importantly, China has now tied the yuan's exchange rate at the start of daily trading to the previous day's close; in the past the starting quote was in effect set at the whim of the PBOC, often creating a big gap with the value at which it last traded.


  It was the elimination of this gap that lay behind the yuan's 2% devaluation in August, a move that rattled global markets.


  Though the yuan is still far from being a free-floating currency—the central bank has intervened since August to prop it up—the cost of such intervention is now higher.