EXCLUSIVE - China's yuan may enter IMF basket with lower share -sources

REUTERS - China's yuan may enter the International Monetary Fund's benchmark currency basket at a lower weighting than previously estimated because of changes in how to calculate the make-up of the basket, people briefed on the Fund's discussions told Reuters.

IMF policymakers are expected to add the Chinese currency to the Special Drawing Rights basket later this month, after a campaign by Beijing for the yuan, or renminbi, to have equal billing with the dollar, euro, pound sterling and yen.

Two people familiar with IMF deliberations said policymakers were considering changing the way the weights of currencies in the basket are calculated to make export volumes less important and financial flows more important.

China, the world's largest exporter, lags other countries in financial transactions and such a change would give China's yuan, also known as the renminbi, a lower share in the basket than under the current formula.

The yuan's inclusion is largely seen as a recognition of China's political and economic heft and as setting the seal of approval on its economic reforms and would likely not have a major impact on financial markets.

IMF staff calculated in July the yuan could have a weighting of about 14 to 16 percent and HSBC estimated it would have about 14 percent under the current formula.

"I would say that it's too high," one person briefed on the IMF discussions said, referring to the estimates.

A second person, an official of a major Asian country who saw the IMF staff report, said: "It's barely a two-digit rate, just the minimum (rate to be a double-digit one)."

The SDR basket determines the mix of currencies that countries like Greece can receive as IMF disbursements and economists expect that inclusion will boost demand for the yuan. A lower weighting may crimp demand slightly.

Last set in 2010, the basket is currently 41.9 percent dollar, 37.4 percent euro, 11.3 percent sterling and 9.4 percent yen.

Capital Economics economist Andrew Kenningham said the methodology change would impact the yuan the most, while the other countries would maintain similar ratios.

"The renminbi is completely different because despite its inclusion in the SDR, it's not really a fully convertible currency and has very thin, much less liquid markets," he said.

The IMF declined to comment.

(Reporting by Reuters bureaus; Writing by Krista Hughes; Editing by David Chance and Andrea Ricci)