MANILA, Philippines - The launch of a new onshore trading system for the Chinese renminbi will help encourage transactions in the currency in line with China being one the biggest drivers of the global economy.
This is according to Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo, who made the comment during the Philippine Dealing System Holdings Corp. (PDS) and Bank of China Ltd.’s (Manila Branch) launch of the Domestic Renminbi Transfer Service in the Philippines.
“We do expect that this facility will truly encourage more transactions in RMB, a currency that is admittedly gaining significance and generating interest in the global market,†Guinigundo said.
“China has been driving the global growth engine for many years now. Therefore, China has no other option but to support more and more cross-border settlements in RMB, reform the RMB exchange rate mechanism, and establish onshore and offshore RMB investment channels. To me, these are the prior steps to promote the internationalization of the RMB,†he added.
Guinigundo said the central bank commends the PDS Group and the Bank of China for the establishment of an infrastructure in the country for RMB-denominated transactions.
This now gives banks a facility for real-time payments in RMB with domestic and international counterparties.
The BSP as early as 2006 has allowed the inclusion of RMB in the list of convertible currencies with the central bank to encourage banks to exchange their RMB to pesos so they could facilitate transactions of Chinese businessmen and tourists.
Moreover, the central bank in 2008 allowed the direct conversion of the RMB as the currency’s role in regional trade transactions continued to increase.
Guinigundo said these efforts were taken by the BSP amid increasing trade and investments between China and the Philippines.
“The economic relationship between the Philippines and China does not only have a long history; it is also growing by leaps and bounds. China is now the third largest foreign trading partner of the country, accounting for about 14 percent of our country’s total trade as of July 2013,†Guinigundo said.
At the same time, net foreign direct investments from China rose to $2 million as of July from a net outflow of $80,000 a year ago, he continued.
“Considering the magnitude and importance of the country’s transactions with China, it is only appropriate that we have a safe and efficient payment and transfer service for RMB,†Guinigundo said.
“The ability of RMB account holders to denominate, settle and clear transactions with parties conducting businesses in RMB minimizes exposure to exchange rate fluctuations of a third currency,†he added.
The new e-payment system is foreseen to reduce the friction cost for RMB trade payments currently settling them in US dollars, and slash transfer charges of transactions that at present pass through more intermediaries.
“Let me assure both the PDS Group and the Bank of China that this kind of initiative with so much economic impact will always have the support of the Bangko Sentral,†Guinigundo said.
At present, there are 11 banks with RMB-denominated products and services like deposits, remittances, and trade settlement, Guinigundo noted.