Representatives of the Bangko Sentral ng Pilipinas (BSP) and 14 banks are set to sign a Memorandum of Understanding (MOU) for the ratification of renminbi (RMB) trading in the Philippines.
This is intended to ensure a fair, transparent, and resilient RMB market following the internationalization of renminbi around 2005, through the use of the currency in offshore capital markets.
It also heralds the opening up of China?s domestic capital market and the liberalization of the interest rate mechanism.
Currently, local banks that have partnered with the Bank of China-Ltd. Manila for renminbi trading are Asia United Bank (AUB), BDO Unibank (BDO), Bank of the Philippine Islands (BPI), China Banking Corporation (ChinaBank), East West Banking Corporation (EastWest Bank), Metropolitan Bank & Trust Company (Metrobank), Philippine Bank of Communications (PBCom), Philippine National Bank (PNB), Philippine Business Bank (PBB), Rizal Commercial Banking Corporation (RCBC), Sterling Bank of Asia, Security Bank Corporation (Security Bank), UnionBank of the Philippines (UnionBank), and Bank of Commerce.
Last month, Bank of China-Ltd. Manila Branch Country Head Deng Jun told the Philippine News Agency (PNA) projected peso-renminbi transactions in the Philippines to reach $10 billion this 2018.
He does not expect a strong growth of renminbi transactions in the near term though but noted that ?we believe that the multi-currencies/peso pairs trading market will come soon in the Philippines for the benefit of the local business community.?
?To save on friction costs and hedge FX (foreign exchange) exposure risks, we would like to encourage enterprises of China and the Philippines to choose RMB rather than a third currency as payment and investment currency for transactions between them,? he said.
As of the moment, the BSP?s renminbi exposure is limited to the Asian Bond Fund and certain money market instruments.
The BSP?s policy-making body, the Monetary Board (MB), has included renminbi as part of its foreign reserves effective October 13, 2016, 15 days after the Chinese currency became part of the International Monetary Fund’s (IMF) special drawing rights (SDR).
To date, the Philippines? foreign reserves are mainly composed of US dollar, SDR, gold and RMB. IMF?s Executive Board decided to include renminbi in the multilateral lender’s SDR basket effective October 1, 2016.
IMF Managing Director Christine Lagarde earlier said the Board’s decision “is an important milestone in the integration of the Chinese economy into the global financial system.?
She said the decision “is also a recognition of the progress that the Chinese authorities have made in the past years in reforming China?s monetary and financial systems.” (PNA)