BSP backs yuan as major international currency
The Bangko Sentral ng Pilipinas sees a benefit in the push to make the Chinese yuan a major international currency and an alternative to the US dollar.
In a forum on Tuesday, BSP Governor Amando Tetangco Jr. said the growing trade of goods and services between China and Asian countries could be better facilitated if they transacted using the yuan instead of the dollar.
“[The use of yuan] will encourage more trade because it minimizes foreign-exchange risk,” Tetangco said in the forum organized by the Foreign Correspondents Association of the Philippines (Focap).
In the case of the Philippines, China has been a growing trade partner. China is both a major export market for Philippine-made goods and a key source of imports.
Government data showed that Philippine imports from China amounted to $597 million in May, up nearly 15 percent from $519.5 million in the same month last year. Philippine exports to China reached $561 million, up 14 percent from $490 million.
Tetangco said efforts of the Chinese government to make the yuan an internationally tradable currency in the future were a welcome development.
“The Chinese government is moving toward that direction,” Tetangco said. “This is going to be positive for countries in the region.”
He said that for one to become a key international currency like the dollar, monetary authorities in the concerned country must adopt liberalized rules on foreign exchange for its currency to be sold and bought easily.
“There are certain characteristics a currency must possess before it becomes a key international currency. First, it must be liquid. Second, there must be minimal foreign-exchange restrictions [to allow] free flow of funds,” Tetangco said.
Proposals to have a key competitor for the dollar have been raised following economic problems confronting the United States that have led to the greenback’s weakening, which has slashed so much value from the foreign exchange reserves of several countries.
