Asia’s central banks want to diversify their growing foreign-exchange reserves into yuan- denominated debt issued by China’s government, according to Bangko Sentral ng Pilipinas Governor Amando Tetangco.
Tetangco, who met with People’s Bank of China as part of an economic road show, said Asian central banks have agreed to “look for new avenues for diversification,” according to an e- mailed from the Philippine Department of Finance. “Given, however, the traditional investment constraints of central banks, I suggest that the Chinese government may consider issuing more yuan-denominated bonds,” he was quoted as saying.
Premier Wen Jiabao is seeking to promote use of the yuan as an alternative to the dollar in global trade and investment, while avoiding a buildup of speculative capital. Cross-border transactions in the yuan totaled $58.7 billion in 2010, 13 times the amount a year earlier, Xinhua News Agency reported April 1, citing the State Administration of Foreign Exchange.
Tetangco’s “comments are ground-breaking as this is the first time that a regional central bank openly stated the intention of emerging Asia to diversify foreign-exchange reserves into yuan-denominated assets,” said Dariusz Kowalczyk, a Hong Kong-based economist at Credit Agricole CIB. “This is a coup for China, which has been working hard to internationalize its currency.”
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