Thailand moves towards diversifying into the renminbi | beyondbrics | FT.com

Thailand moves towards diversifying into the renminbi

September 29, 2010 10:34am

by Tim Johnston






Soon after China’s recent move towards internationalising its currency, Malaysia’s central bank bought renminbi-denominated bonds for its reserves . The move prompted speculation that this would set off a domino effect among China’s trade partners in Asia.

Now that Thailand’s central bank has opened a representative office in China, could Bangkok be next to add renminbi-denominated bonds to its foreign reserve mix?In August, the People’s Bank of China cleared the way for countries with which it holds currency swap agreements — Argentina, Belarus, Hong Kong, Iceland, Indonesia, Malaysia, Singapore and South Korea - to buy renminbi-denominated bonds. Malaysia has taken up the offer, but it is unclear if any of the others have taken a similar route.

Thailand’s swap agreement doesn’t yet include the right to buy Chinese bonds. According to a press release from the Bank of Thailand:
The establishment of the BOT representative office in Beijing marks an important milestone in further fostering and developing even closer relationship between the BOT and the PBoC, as well as other Chinese government agencies.
Bank officials talk coyly of the office as a “listening post”, similar to outposts it maintains in London and New York. But Thailand is sitting on $157bn in foreign reserves and although it won’t comment officially, there seems to be a move towards diversification. Given that China accounts for 10 per cent of Thailand’s exports, the renminbi would be a natural addition.

In a recent interview, Korn Chatikavanij, the finance minister, said he would be happy for Thailand to hold renminbi-denominated bonds:
The central bank is in discussions: the licence to open a representative office is part of that process.
In other words, keep an eye out for more falling renminbi dominoes in Asia.