On Wednesday of last week, the International Monetary Fund announced that China was reporting its currency reserves to the fund for the first time. Political analysts highlight that this is a key milestone in opening up an important aspect of China’s economy to more public scrutiny.

The decision by the Chinese authorities is likely connected to the fact that the government has been working hard to see the Chinese yuan included in the IMF’s basket of reserve currencies.

China Yuan

China begins reporting currency reserves through the IMF

The IMF noted that China was now reporting a “representative portfolio on a partial basis,” which translated into English means what has been shared so far is the just the fractional breakdown of its holdings of different currencies. Moreover, the People’s Bank of China will gradually report more of its foreign-exchange holdings over the next two to three years to reach full compliance with IMF requirements.

Of note, last week marked the first time the IMF listed all of the countries that report their foreign exchange holdings to the fund. Apparently 146 of the 188 IMF members provide currency reserves data to the fund, but only 96 agreed to be publicly named.

When you include the new data from China, global currency reserves moved up by $600 billion in the second quarter of 2015. A quick and dirty analysis of the fund’s breakdown of the aggregated share of different currencies held suggests China’s currency portfolio is similar to that of most central-banks: 60% dollars and 20% euros and pounds sterling, with a smattering of Japanese yen and other major currencies in the single digits.

Keep in mind that for China, having the yuan included in the IMF’s currency basket is a big deal in terms of reflecting its new status as a global power. However, the IMF is firm on its standards, and significant institutional and regulatory reform is needed for China to move forward. As noted by ValueWalk in August, analysts at the IMF also argue that continued reform in currency regulations and improved transparency across the Chinese economy is important to help the Middle Kingdom successfully transition to a consumer economy and avoid a hard landing.

In order to earn reserve-currency status at the IMF, China has already started to reform its exchange-rate regime and offer more insight into its currency policies. China promised it would provide more details about its reserve holdings in 2014, and this information will help global bankers and policy makers understand how much and how often the PBOC is intervening in its exchange rate.

China has now begun to report its foreign-exchange reserves every month instead of just quarterly, and the PBOC will also begin disclosing its gold holdings every month.