The head of the Duterte administration’s economic team expects more trade and investment flows between the Philippines and China following the rollout of the peso-renminbi trading platform.
Finance Secretary Carlos G. Dominguez III on Tuesday noted that in the past, transactions involving the two currencies involved pricing each according to their respective exchange rates with the US dollar.
“This process implied unavoidable costs to the transactions. It created friction that slowed down trade and investment,” Dominguez said in his speech during the signing of the memorandum of agreement (MOA) among 14 banks to establish the Philippine renminbi trading community.
“It is our estimate that our businessmen could have saved as much as 3 percent of transaction value if we had a trading platform for both our currencies. That will add up to a substantial sum given the exponential growth of our business partnerships,” Dominguez added.
With the direct conversion of the two currencies set to start this month, Dominguez said “we anticipate a significant reduction in the cost of doing business across our two economies as a result of this.”
“This currency trading platform will bring benefit to both private enterprises as well as the government. We foresee improved access to China’s bond market using the price discovery process created by this mechanism,” according to the finance chief, who had said the government plans to tap the panda bond market every 12-18 months. —BEN O. DE VERA