MANILA, Philippines — The Bank of China Manila is partnering with local banks to allow Philippine companies to change their renminbi (RMB) into pesos, and vice-versa, at better exchange rates without having to rely on the US dollar as an intermediate peg.
Bank of China is set to sign a memorandum of understanding (MOU) with 15 local banks in the third quarter to organize the Philippine RMB Community to make international RMB-denominated transactions more convenient and cost-efficient through a peso-renminbi spot market approved by the Bangko Sentral Pilipinas (BSP) last March.
Deng Jun, Philippine country head of Bank of China said the RMB community is an opportunity to deepen trade and investment between the two countries.
“Bank of China is currently the only Chinese-funded bank in the Philippines. Since its establishment in Manila, we have regarded promoting China-Philippine economic and trade exchanges as our responsibility, and have made efforts to becoming a bridge between the two with regard to trade and economy, investment, finance, and cultural exchanges and cooperation,” he said.
China is the country’s top trade and investment partner with government analysts projecting even greater cross-border deals over the medium term.
“The renminbi has become an important player in global payments and trade settlement. Our role in the Philippines is to act as a bridge between the Philippines and China – to educate and inform our clients of the advantages on the use of RMB and help them improve relationships with trading partners while helping mitigate foreign exchange risk,” he said.
The use of RMB presents several practical benefits for Philippine businesses from tourism to foreign direct investments to Filipino companies sourcing their raw materials from Chinese suppliers.
At present, transactions between Filipino and Chinese businesses must first be priced using the current US dollar rate entailing additional margin cost of one to two percent.
When settling in RMB, the Philippines would become a more attractive tourist destination as close to one million Chinese nationals who spend $1,541 per trip per person visited the country last year.
“Chinese tourists will soon be able to change their RMB into pesos at better exchange rates, while Filipino merchants would be able to accept RMB, which they can later exchange for peso with banks at lower costs,” Bank of China said.
Likewise, RMB reserves would open the door to increased investments from mainland China as doing away with the need to exchange RMB for US dollar would be a tremendous incentive for Chinese investors.