MANILA, Nov. 28 (Xinhua) -- The newly launched direct trading between the Chinese currency renminbi (RMB) and the Philippine peso (PHP) will alleviate the rate volatility and create more efficiency in the settlement of trade between China and the Philippines, President and CEO of Banco de Oro (BDO) Unibank Nestor Tan said.
"It is a good first step," Tan said, referring to the recently signed MoU between the Philippine central bank Bangko Sentral ng Pilipinas (BSP) and Bank of China Manila Branch, along with its local banking partners that ratifies the formalization of the Philippine RMB Trading Community that aims to promote fair, transparent and resilient domestic RMB market.
The PHP-RMB spot market is seen to help boost trade and business relations between the Philippines and China.
BDO is the largest commercial bank in the Philippines. On Oct. 30, the Bank of China Manila Branch together with 13 Philippine biggest banks, including BDO, jointly ratified the launch of the Philippine RMB Trading Community.
RMB is the only foreign currency that can be directly exchanged except U.S. dollars in the Philippines. According to the Bank of China Manila Branch, the Philippine RMB Trading Community completed the first direct exchange between RMB and peso on Nov. 20.
"The direct exchange between RMB and PHP will alleviate the rate volatility and create more efficiency in the settlement of trades between the two countries," Tan told Xinhua in a recent interview.
Right now, Tan said cross currency trades are subject to the movements of the U.S. dollars. "With the direct exchange between PHP and RMB, we will be able to eliminate some of those volatilities and the cost of having to do cross-country trade," Tan added.
With the RMB-PHP spot market, Tan said it would be easier to exchange the two currencies.
"It will encourage a lot of importers and exporters to denominate their goods and services in RMB and PHP. It gives us a lot of optimism because we always want to have a healthy relationship with our trading partners and our neighbors," Tan said.
China and the Philippines have recently forged advance cooperation aimed at strengthening the link between the China- proposed Belt and Road Initiative and the Philippines' long-term vision to build roads, bridges, railways, ports and telecommunication facilities in this archipelagic Southeast Asian country.
Tan said the Philippines imports a lot of construction materials from China. "(The RMB-PHP exchange facility) will facilitate the infrastructure building construction if we are able to source that and denominate that in RMB," he said.
At the same time, Tan said importers would also benefit from having the ability to exchange their PHP directly into RMB. "We export a lot of things to China as well like ore, so having that same capability will help," Tan said.
The bank chief said establishment of the RMB-PHP exchange facility will not only benefit trade but also facilitate tourism between China and the Philippines, adding that access to both markets will now be improved.
"It will be beneficial to the Chinese tourists and consumers to the Philippines in the future. The Chinese tourists and consumers can enjoy a better exchange rate in the future," Tan said.