MANILA, Philippines - British banking giant Hong Kong and Shanghai Banking Corp. (HSBC) expects huge benefits for companies in the Philippines using the Chinese yuan or renminbi (RMB) in their cross-border transactions.
HSBC Philippines senior vice president and treasurer Wick Veloso said customers engaged in RMB trade settlement in the Philippines would be able to reduce or eliminate the cost involved in currency conversions.
By availing of bank’s RMB trade settlement services, Veloso explained that customers would be able to keep RMB in their local deposit accounts that could be used against their receivables from China.
He pointed out that customers would simply debit their RMB account to settle trade transactions.
Aside from opening savings accounts, he said companies operating in the Philippines could purchase RMB foreign exchange or conduct RMB foreign exchange forwards, swaps, and options.
Furthermore, he added that these companies could trade and settle RMB denominated goods and services with enterprises in China or other overseas countries through documentary credit or open account.
The HSBC treasurer said these firms could also invest in RMB instruments including deposits, structured products, bonds, and funds or raise RMB funding through bond issuances and equities.
Based on HSBC estimates, RMB could become the third highest turnover currency in the world if it is fully convertible.
Data showed that the transaction volume for cross border trade settlement of RMB increased significantly after its relaxation in July last year.
Veloso said more than half of China’s total trade flows with emerging markets including the Philippines would be settled in RMB by 2015.
He added that 56 percent of exporters and importers in Hong Kong expect to settle trade transactions in RMB while 17 major markets in Asia Pacific see increased RMB trade activity this year.
The Bangko Sentral ng Pilipinas (BSP) noted that RMB transactions of Philippine banks are growing rapidly.
The BSP’s Monetary Board approved the inclusion of RMB in the list of currencies convertible with the central bank in December 2006.
HSBC is the first foreign bank to settle cross-border RMB trade in Hong Kong and in all country members of the Association of Southeast Asian Nations (ASEAN).
HSBC Philippines currently settles trade transactions in RMB.
China, with a population of 1.3 billion, surpassed Japan as the world’s second largest economy in the second quarter of last year.
Data from the National Statistics Office (NSO) showed that Philippine exports jumped 33.69 percent to $51.39 billion last year.
Combined markets of China and the Hong Kong Special Administrative Region accounted for about 19.52 percent of the country’s total merchandise exports. This was followed by Japan with 15.17 percent, and US with 14.70 percent.
Top exports of the Philippines to China in last year were electrical machinery and equipment, mechanical appliances, ores, copper, minerals, plastics and electronic goods.
On the other hand, China’s top exports to the Philippines included electrical machinery and equipment, mechanical appliances, iron and steel, minerals and clothing accessories.