The International Monetary Fund's decision to designate the Chinese renminbi, commonly known as the yuan, as a global reserve currency will, over time, encourage the country's leadership to make the currency more tradable. But the political implications of global reserve status may be more significant than the economic ones.
China is the first non-democracy in the elite reserve group that includes the European Union, Japan, the United Kingdom and the United States. President Xi Jinping will have to demonstrate that China's unique system of governance can produce the degree of stability and predictability in transition that characterizes the other regimes in the club. And that in turn will constrain him as he considers whether, and how, to begin the process of changing power to a successor in roughly seven years.
Start with the definition of a global reserve currency used by the IMF. Formally the IMF measured two things: whether the yuan was "widely used to make payments for international transactions" and "widely traded in the principal exchange markets."