MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said the inclusion of the Chinese yuan in the benchmark foreign exchange currency of the International Monetary Fund (IMF) would benefit the Philippines.
BSP Governor Amando Tetangco Jr. said the inclusion of the Chinese yuan in the special drawing rights (SDR) basket would increase the use of the currency in global financial transactions.
The inclusion of the Chinese yuan in the SDR basket makes it on par with the dollar, Japanese yen, British pound and euro. The IMF executive board is set to meet on Nov. 30 to discuss the issue.
“I think this will lead to some portfolio rebalancing by investors and there may be likely an increase in the demand for Chinese yuan. On a broader thing as far as we’re concerned, the Philippine economy can look at this as also a medium of settlement of trade transactions,” Tetangco said.
The BSP cited the growing trade between the Philippines and China. According to the Philippine Statistics Authority (PSA) China is the country’s second largest trading partner.
Trade between the Philippines and China amounted to $18.337 billion last year, accoun-ting for 14.3 percent of the country’s total trade. Philippine exports to China reached $8.47 billion while imports amounted to $9.87 billion.
“That opportunity there, thereby, both Chinese and Filipino traders can benefit the use of just one currency without having to go to the third currencies in settlement of transactions,” Tetangco said.
Tetangco said the BSP could use the Chinese yuan to further expand the composition of its foreign exchange reserves.
“That is clearly an option for the BSP in its efforts to diversify the foreign currency composition of its reserves and to enhance its yields on foreign exchange assets,” he added.
Tetangco explained the BSP would have to understand how the domestic market works in China.