"In my observation, China has the ability to devalue yuan completely.... But I don't expect very dramatic depreciation of the yuan," Zhongxia Jin, Executive Director for China at IMF, said here.

China's Central Bank has devalued the yuan by 0.51 percent to 6.56 percent against the dollar, the lowest since March 2011.

Last year, the Washington-based multilateral agency had included renminbi into the special drawing rights (SDR) basket.

Such a move from IMF at a time when the Chinese economy has slowed and has been overtaken by India in terms of growth rate is seen by many experts as a move by the international body to push China for a new set of economic reforms.

China had devalued its currency twice in 2015, which had led to a crash in global equity markets, including India.

"A exchange rate that has been fundamentally determined by the market will be good both for China and the rest of the world," Zhongxia emphasised.

Created by IMF in 1969, SDR is an international reserve asset created to supplement its members' official reserves. It can be exchanged among governments for freely usable currencies in times of need.

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