China might push Yuan through AIIB

This is the year when IMF in latter half of the year will review its SDR composition and probabilities are high that Chinese Yuan might be selected as an official reserve currency which would enhance Yuan's global acceptance.

China might have Plan B -

This year China set up Asia Infrastructure Investment Bank (AIIB) that is expected to challenge the role of IMF, World Bank and moreover Asia Development Bank.

• Chinese officials are now expected to push Yuan through AIIB loans. AIIB is expected to use a basket of currencies similar to IMF using SDR, however Chinese officials would lobby heavily to add Yuan to the basket.
  
  
• Beijing officials might also go for setting up special investment vehicles that would grant loans in Chinese Yuan. These funds will be made attractive using interest rate differential.

However China need to ease up the restrictions that still remains in line with Yuan and stop managing the currency by intervening in the market.

• Yuan as of now is not fully convertible as capital account restrictions remains. Yuan trades in low volatility environment as currency is maintained within 2% band of mid-day rate. Chinese central bank PBOC announces dollar Yuan mid-day rate.

Silk Road fund worth $40 billion has also been set up, China might push for final settlement in Yuan or set up special funds that would lend in Yuan.

The success of AIIB will decide the fate of Chinese Yuan's bid to gain prominence as global currency.