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BSP includes renminbi in GIR

Following IMF SDR inclusion

With a Duterte government leaning towards China as source of trade and investments, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. yesterday said the Chinese renminbi (RMB) is now one of the official currencies of the country’s gross international reserves (GIR).

Tetangco announced yesterday that the Monetary Board, BSP’s policy-making body, approved the inclusion of RMB in the GIR to make it readily available to the banking system. The GIR is primarily in US dollars but also includes other currencies such as the Japanese yen in smaller portions.

Amando M. Tetangco Jr.

Amando M. Tetangco Jr.

Amando M. Tetangco Jr.

The International Monetary Fund (IMF) recently included the RMB as part of its special drawing rights (SDR) list of currencies, the fifth in the SDR basket which is in US dollar, Japanese yen, the euro and the British pound.

(Renminbi is the official name of the currency introduced by the Communist People’s Republic of China at the time of its foundation in 1949. It means “the people’s currency”.”Yuan” is the name of a unit of the renminbi currency. Something may cost one yuan or 10 yuan. It would not be correct to say that it cost 10 renminbi).

Since the RMB is now part of the SDR valuation, the BSP decided to make RMB reserve-eligible beginning on October 1 this year.

As part of the SDR basket of reserve currencies, the RMB will also determine the value of the SDR and that “the rising economic and financial importance abroad of China” is expected to increase the use of this currency, said the BSP.

The central bank said the Monetary Board decision also has a lot to do with the “increasing linkages with China” particularly after President Duterte’s state visit to that country where he brought home investment pledges reportedly amounting to $24 billion.

Citing data from the Philippine Statistics Office, the BSP said Philippine exports to China increased by 7.9 percent from $5.7 billion in 2010 to $6.2 billion in 2015.

In the first seven months of 2016, China ranked as the fourth largest destination of Philippine exports, with 10.2 percent share or $ 3.2 billion to total exports.

Imports from China, in the meantime, increased from $4.6 billion in 2010 to $11.5 billion in 2015. “By 2013, China had become the biggest source of Philippine imports, and this continued in the first seven months of the year, with imports from China at 18.5 percent ($ 8.4 billion) of total imports,” noted the BSP.

In terms of tourist arrivals, data from the Department of Tourism show that in July, 2016, China ranked as the second biggest visitor market for the Philippines, an improvement from its fourth place ranking in 2015, added the BSP.

As early as 2011, the BSP has already began studying using the RMB as trade currency between the Philippines and China. However, since there was no real demand for RMB in the Philippines, the plan was sidetracked. The central bank maintains a floating exchange rate system which is determined on the basis of supply and demand in the foreign exchange market.

Since 2006, the Chinese yuan is a currency convertible with the BSP and it is an acceptable currency for export receipts. The yuan is the base unit of the RMB.