TAIPEI, Taiwan -- It's hard to overestimate China's passion for the international limelight.
It spent $44 billion on the 2008 Olympics, setting a record then, and $2 billion on United Nations aid this year to earn world respect.
This week, China -- resentful that its Western peers have overshadowed it internationally -- won a victory for the yuan currency. The International Monetary Fund said it would let the normally restricted Chinese currency join a $204.1 billion pool of funds for special drawing rights, meaning it's available for exchange as a freely usable unit.
Was it just another symbolic achievement?
The short answer is yes. But the full answer -- especially for stock and fixed-income investors -- is maybe there's more to it.
The IMF's admission of the yuan as 10.9% of its special drawing rights basket allows for more Chinese currency transactions overseas. Central banks, sovereign wealth funds and multilateral economic institutions will increase yuan holdings to $80 billion to $100 billion over the next year or two, said Scott Kennedy, director with the Project on Chinese Business & Political Economy under the Center for Strategic & International Studies think tank.
But private investors are unlikely to buy the IMF's yuan because it's "just not very important to them," Kennedy said.
China already faces a "big debt burden," slowing economic growth, and the specter of capital market volatility, he said, factors that are "much more important to investors than the composition of the special drawing rights basket."
The IMF created its pot of special drawing right currencies -- which now includes the euro, the British pound, the yen and the U.S. dollar, in addition to the yuan -- in 1969 to help member countries buy domestic currencies in foreign exchange markets and maintain exchange rates. But the Bretton Woods agreement that got the scheme started collapsed a few years later.
The IMF now calls its reserve currencies a "supplementary reserve asset" and "the unit of account of the IMF and some other international organizations." But China's currency sort of missed the party.