BSP open to increasing yuan holdings

By Joann Santiago

MANILA, Nov. 19 (PNA) — The Bangko Sentral ng Pilipinas (BSP) is open to the possibility of hiking its renminbi holdings on back of the expanding use of the Chinese currency.

“Now that the PBoC (People’s Bank of China) has liberalized its policies and regulations allowing central banks to invest in onshore market, we will definitely consider that and make a decision on how we need to move forward at that point,” BSP Governor Amando Tetangco Jr. said.

China’s central bank continues to push for the inclusion of the yuan in the International Monetary Fund’s (IMF) special drawing rights (SDR) basket.

Tetangco said increasing yuan holdings “is clearly an option for the BSP” in line with its bid to diversify its foreign exchange reserves as well as improve yields from these assets.

He, however, said that Philippine monetary officials still need to study how China’s domestic financial market works.

To date, BSP’s yuan exposure is through its share in the Executives’ Meeting of East Asia Pacific Central Banks’ (EMEAP) Asian Bond Fund (ABF), the Bank for International Settlements’ (BIS) China Fund and the offshore market of Hong Kong.

The central bank chief cited that eventual inclusion of renminbi in IMF’s SDR basket will increase its use in global financial transactions.

“I think this will lead to some portfolio rebalancing by investors and there may be likely an increase in the demand for RMB,” he said.

Tetangco is not that worried about the possible impact of this situation on the Philippine economy, citing that the country continues to enjoy the benefits of having strong economic fundamentals.

Relatively, Tetangco said China accounts for about 12-14 percent of Philippines’ exports and eight to nine percent of imports.

“There’s opportunity there, thereby, both Chinese and Filipino traders can benefit from the use of just one currency without having to go to third currencies in settlement of transactions,” he said.

Similarly, the PBoC’s latest decision benefitted its currency and hurt the others.

Tetangco said the first possible channel of this development is the financial market, through risk aversion.

He, on the other hand, considers the negative impact to be temporary on back of the economy’s macroeconomic fundamentals.

“And investors now tend to discriminate across emerging market economies, and those with some macroeconomic fundamentals are bound to benefit from most of the assessments of fund managers and investors,” he added. (PNA)