MANILA (2nd UPDATE) - The Philippine central bank said the Chinese yuan will be included in its official international reserves, just days after President Rodrigo Duterte returned from a visit to China that was aimed at forging closer economic and political ties with Beijing.
"The BSP may hold RMB as part of its Gross International Reserves to ensure that the said currency is available to the banking system when needed," the Bangko Sentral ng Pilipinas said in a statement on Monday.
BSP Governor Amando Tetangco told Reuters via a text message that no target has been set for the yuan's weighting in the central bank's reserves but that the amount will eventually "be related to actual relative demand."
Duterte, accompanied by at least 200 business people, went to China last week to pave the way for what he calls a new commercial alliance as relations with longtime ally Washington deteriorate.
At present, the central bank's gross international reserves (GIR), which stood at $85.9 billion as of September, are held in various currencies, mainly the U.S. dollar, International Monetary Fund (IMF) Special Drawing Rights, and gold.
The yuan's inclusion in the reserves is retro-effective from Oct. 13, the central bank said.
It said its decision took into consideration an expected increase in the use of the yuan in line with China's growing global economic and financial clout, as well as increasing trade between the two nations.
Economists say there are fundamental trade reasons for the central bank to include the Chinese currency in its reserves portfolio.
"Since (yuan) is now part of the SDR (IMF Special Drawing Rights) basket, it is only natural for any central bank to incorporate the addition to its FX reserves, more so if trade with China booms," said Joey Cuyegkeng of ING Bank Manila.
China was the Philippines' fourth biggest export market and top source of imports in the first seven months of the year.