Bank of China, DOF sign MOU on panda bond issuance

MANILA, Philippines — The Department of Finance (DOF) and the Bank of China (BOC) on Tuesday forged a cooperation agreement to help facilitate the Philippine government’s future panda-bond issuances worth six billion renminbi (RMB) over the next two years.

A memorandum of understanding (MOU) for the cooperation was signed by Finance Secretary Carlos Dominguez and Bank of China chairman Chen Siqing at Malacañang on Tuesday, with President Duterte and Chinese President Xi Jinping as witnesses.

“This new partnership aims to further facilitate cross-border opportunities by bringing more renminbi funding to the Philippines that will make foreign investments more convenient and cost-efficient,” said Deng Jun, country head of Bank of China Manila Branch.

“With these funds readily available, we hope to spur investments between the Philippines and the mainland that will contribute to the economic growth of the two countries,” he said.

National Treasurer Rosalia De Leon said the MOU came in time before the Philippines’ upcoming return to the China interbank bond market next year, which will once again be handled by the Bank of China.

“We signed the MOU because Bank of China would be the bank that would be working with the Treasury for the next issuance on the onshore RMB market,” De Leon said.

The national treasurer said the MOU would cover a possible multi-tranche panda bond issuance over the next two years, with a maximum amount of RMB six billion.

“The RMB six billion is our registration for the next two years. Either we avail everything (in one issuance) or on a staggered basis,” De Leon said.

The agreement also came a few weeks after the establishment of the Philippine RMB Trading Community, which provides a local platform for direct renminbi to peso exchange, and vice versa.

De Leon said the facility would help the government lower the cost of its borrowings from China.

The Philippines and China formalized 29 economic agreements during President Xi’s state visit in Manila.

Aside from its MOU with Bank of China, the  DOF also signed three agreements with Beijing involving the implementation of key infrastructure projects under the Build Build Build program.

Among those signed by Dominguez was the MOU on Jointly Promoting the Cooperation in Key Infrastructure Projects in Davao Region.

The MOU outlines the cooperation arrangements between the Philippines and China in implementing big-ticket infrastructure  projects in Davao, including the Davao City Expressway Project,  the Davao-Samal Bridge, and the Bucana-Davao River Coastal Bypass Road of the Department of Public Works and Highways; and the Mindanao Railway Project of the Department of Transportation.

Dominguez and Wang Xiaotao, the chairman of the China International Development Cooperation Agency (CIDCA), also signed a MOU on China’s support for the feasibility study of select major infrastructure projects in the country.

The DOF and CIDCA also formally exchanged documents on the financing arrangements for new projects covered by the Philippines-China agreement on economic and technical cooperation.

These include the construction of the Davao River Bridge (Bucana) project, the donation of x-ray machines and scanning technologies to the Bureau of Customs  and other projects to be mutually agreed upon by the two governments.