The Bangko Sentral ng Pilipinas (BSP) has included the Chinese renminbi (RMB) as part of the basket of currencies that make up the country's official international reserves.
The central bank's policy-setting Monetary Board has approved the RMB, also called yuan, to be a part of the foreign reserves.
In an emailed statement on Monday, the central bank noted the yuan was included in the official international reserves as of October 13. The announcement was made following the landmark state visit of President Rodrigo Duterte to China last week.
On Friday, Trade Secretary Ramon Lopez disclosed that the state visit yielded $24 billion of investments and credit facilities in favor of the Philippines.
But the decision of the Monetary Board was in line with earlier moves of the International Monetary Fund (IMF), and not on the recent visit of President Rodrigo R. Duterte to China, according to the central bank.
“This is more in keeping with the decision of the IMF to consider the RMB as part of the SDR or special drawing rights beginning early this month. This is in recognition of China and RMB’s role in international trade and finance, global liquidity, and policy reforms,” BSP Deputy Governor Diwa C. Guinigundo said in a separate text message.
The central bank counts the euro, Japanese yen, US dollar, and British pound as part of its international reserves, making the renminbi the fifth currency in the basket.
“The BSP may hold RMB as part of its gross international reserves (GIR) to ensure that the said currency is available to the banking system when needed. At present, the country’s GIR is held in various currencies, mainly the US dollar, International Monetary Fund (IMF) Special Drawing Rights (SDR), and gold,” the central bank noted.
The GIR is a measure of the country’s capability to settle import payments and service foreign debt. The central bank expects its foreign reserves to reach $82.7 billion this year, up from the $80.667 billion as of end-2015.
The country's foreign reserves stood at $85.899 billion as of end-September, up from the $85.792 billion in August.
“In deciding to make the RMB Philippine reserve-eligible, the Monetary Board took into consideration the inclusion of the RMB effective 1 October 2016 in the basket of reserve currencies that determine the value of the IMF SDR and the rising economic and financial importance abroad of China that is expected to increase the use of the said currency,” the central bank said.
According to the BSP, the Monetary Board also took into consideration the Philippines' “increasing economic linkages” with China.
Data from the Philippine Statistics Authority (PSA) showed Philippine exports to China rose by 7.9 percent to $6.2 billion in 2010 from $5.7 billion a year earlier. China ranked fourth in terms of the largest destination of Philippine shipments in the first seven months of 2016.
Philippine imports from China grew 2.5 times to $11.5 billion in 2015 from $4.6 billion in 2010. — VDS, GMA News