The Philippines is expected to “win a larger share” of China’s overseas investments reaching an estimated $120 billion combined with the signing of an agreement that would clear the way for the direct conversion of the respective currencies of the two countries under a soon-to-be formed Philippine Renminbi Trading Community (PRTC) and peso-renminbi spot market, Finance Secretary Carlos Dominguez III said.
Dominguez said this milestone in the area of economic cooperation between the two countries also offers the Philippines, through the price discovery process, improved access to China’s bond market, where the government plans to establish a recurrent presence by issuing “Panda” bonds every 12 to 18 months.
The memorandum of agreement (MOA) signed Tuesday by 13 Filipino banks and the local branch of the Bank of China provides the provisional framework, scope and criteria for membership of the PRTC, which would be under the direct supervision of the Bangko Sentral ng Pilipinas (BSP). PRTC will serve as the precursor leading to the launching of the peso-renminbi foreign exchange spot market.
Aside from the Manila branch of the Bank of China, the other signatories to the MOA, which comprise the initial members of the PRTC are: Asia United Bank, Bank of Commerce, Bank of the Philippine Islands, BDO Unibank Inc., China Banking Corp., East West Banking Corp., Metropolitan Bank and Trust Company, Philippine Bank of Communications, Philippine Business Bank, Philippine National Bank, Rizal Commercial Banking Corp., Security Bank Corp., and Union Bank of the Philippines.
The PRTC will later open its doors to new members seeking to take part in the trading platform in the future, Dominguez said.
“We take this major step forward in the economic partnership between the Philippines and China. On both sides, there is confidence that this partnership will bring great benefits to both our peoples. This is a partnership nurtured by the warm friendship between our two countries,” Dominguez said during the MOA signing ceremony.
Dominguez,Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi Fonacier and former BSP Governor Amando Tetangco Jr. were among those who witnessed the signing of the MOA held at the Makati Shangri-La, Manila in Makati City.
“We are now taking the first steps toward building the mechanism for the direct conversion of our currencies. The volume of business between our two economies justifies establishing this. The banks participating in this memorandum of agreement will set in motion the process of setting up a self-regulating organization that will oversee a transparent currency trading platform,” Dominguez said. “We anticipate a significant reduction in the cost of doing business across our two economies as a result of this.”
He said the creation of this currency conversion market or currency trading platform will reduce the costs of doing business for Chinese and Filipino businessmen and avoid the “friction” generated by pricing the exchange rates of the peso and renminbi in dollars, which slowed down trade and investments. (DOF)
