Monetary officials of the Philippines with the support of Filipino and Chinese businessmen are now working to make the Chinese currency Renminbi, or yuan, as a trade currency in the country.

The Bangko Sentral ng Pilipinas (Central Bank of the Philippines) has already started reviewing the use of yuan as settlement for trade between the Philippines and China.

Banks and foreign exchange traders consulted by the BSP have confirmed that the liquidity of the yuan in the domestic market is "very thin" compared to the U.S. dollar and other major currencies.

A group of businessmen have encouraged the BSP to allow the use of renminbi in trade transactions, saying that this would definitely lead to higher volume of trade between the two countries.

Francis Chua, president of the Philippine Chamber of Commerce and Industry (PCCI) said they could work with the BSP on the use of yuan as settlement for trade transactions.

"If we use it more as trade currency (with China) then we will capture as much business as we want. We should definitely work on that idea," said Chua.

The yuan is an emerging global reserve currency with China holding the largest foreign currency reserves in the world at over 3 trillion U.S. dollars.

Because of its sustained economic growth, China has also surpassed Japan as the world's second biggest economy, next only to the United States.

Local analysts are convinced that yuan would eventually join the U.S. dollar, euro and yen as a major international currency, with signs of strength already being seen through increased trade in the Philippine capital markets.

BDO Capital Investments President Ed Francisco said that with the Philippines' growing trade links with China, it may only be a few years before the renminbi becomes a competitive currency in the foreign exchange market.

"China's still the story, specially for multinationals and big corporations. If you want to get a bang for your buck, that's where you invest. It may only take three to five years before it is included in the major basket of currencies," he said.

Citiseconline's Chief Technical Analyst Juanis Barredo said that part of the reason why more banks are investing in the Chinese currency is their need to hedge positions against the dollar, as the U.S. economy continues to reel from effects of the global financial crisis.

Since 2006, yuan is a currency convertible with the BSP, thus it is an acceptable currency for export receipts.

Early last year, BSP Governor Amando Tetangco Jr. said that the banking sector's renminbi transactions were expected to increase as trade with China and the Philippines continued to expand.

According to Tetangco, the renminbi business would grow as more banks realize the business opportunities in dealing in yuan. Between 2009 and 2010, six local banks, including the Metropolitan Bank and Trust Co., Bank of the Philippine Islands and Philippine National Bank, have accepted deposits in renminbi.

It is reported that the People's Bank of China (PBOC) has already signed bilateral currency swap agreements with central banks of Malaysia, Belarus, Indonesia, Argentina, and Singapore. The Hong Kong and Shanghai Banking Corporation (HSBC) has suggested that Thailand, Vietnam, and the Philippines "are not far behind" in signing swap agreements with the PBOC.

On the other hand, the World Bank report, entitled "Global Development Horizons," has estimated that by 2025 six major emerging economies -- Brazil, China, India, Indonesia, South Korea and Russia -- would collectively account for more than half of all global growth.

The report said that centers of global growth would be distributed across developed and emerging economies, giving rise to what the World Bank described as a "multipolar world."

These shifts will have far-reaching implications on the world's monetary system. "The most likely scenario is a multi-currency system centered around the U.S. dollar, the euro and the renminbi would emerge. Under that scenario, the dollar would lose its position as the unquestioned principal international currency by 2025, making way for an expanded international role for the euro and the burgeoning role for the renminbi," the report said.