Canada seeks to become Renminbi (RMB) trading centre for the Americas

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Canada seeks to become Renminbi (RMB) trading centre for the Americas

Partnership announced to support initiative

TORONTO, Aug. 27, 2014 /CNW/ - The Toronto Financial Services Alliance (TFSA) and AdvantageBC today announced they would work together, with officials from the federal, Ontario and BC governments, and the financial industry, to promote Canada as a trading hub for the Chinese currency, the Renminbi (RMB).

In a joint statement Colin Hansen, President and CEO of AdvantageBC, and Janet Ecker, President and CEO of the Toronto Financial Services Alliance, said:

"Canada has many advantages to offer China as a partner in their efforts to encourage the internationalization of the RMB, and as we seek to expand our business and trading relationships with them. Canada's time zones, its well-developed financial infrastructure, capital markets and risk management expertise, the strong and growing economic relationship between the two countries, and a growing Chinese population in both Toronto and Vancouver provide many reasons for China to consider partnering with Canada and its financial and business community."

"While Canada's financial industry is headquartered in Toronto, much of the country's Canada-China trade passes through Vancouver, making it critical for both jurisdictions to work collaboratively so that Canadian businesses are able to take full advantage of this initiative," the two CEOs agreed.

Representatives of Canada's business community have already expressed support for the initiative. "The establishment of Canada as a RMB centre will continue to raise our stature as a global financial centre and will facilitate increased trade and investment with China, thus benefitting the entire Canadian economy," said Perrin Beatty, President & CEO of the Canadian Chamber of Commerce. Support has also been expressed from the Canadian Council of Chief Executives, the Canadian Manufacturers & Exporters and the Canada China Business Council.

Work is already well underway to support this initiative. For example, in 2013, BC issued a government bond denominated in RMB to become the first "dim sum" bond in Canada. It was quickly oversubscribed, largely by Asian investors. Also last year, Ontario's TFSA established a working group with representation from thirteen national financial companies and three public sector observers (see list below). The working group is co-chaired by financial executives from BMO Financial Group, HSBC Bank Canada, Bank of China (Canada) and the Industrial and Commercial Bank ofChina (Canada).

A similar group is being established in British Columbia. TFSA and AdvantageBC have also established a steering committee to coordinate the work of the two groups.

Key Facts:

• The Renminbi is currently the second-most used currency in global trade finance and is growing faster than any other currency in the world.
• Following the establishment of Hong Kong as the first RMB settlement centre in 2009, a small number of other centres have been authorized including Singapore, London, Frankfurt, and Luxembourg. None have yet been identified for the Americas.
• Trade between Canada and China has increased to $73 billion in 2013, an increase of 60% from 2009.
• Almost 1.5 million Canadians identify themselves as having Chinese ethnic origin.
• Members of TFSA RMB Working Group:
  • Bank of Canada*
  • Bank of China (Canada)**
  • BMO Financial Group**
  • China Construction Bank
  • CIBC
  • Finance Canada*
  • HSBC Bank Canada**
  • Industrial and Commercial Bank of China (Canada)**
  • Manulife Financial
  • National Bank of Canada
  • Ontario Financing Authority*
  • RBC
  • Scotiabank
  • Sun Life Financial
  • TD Bank Group
  • TMX Group

*observer
**co-chairs

Quotes from Co-chairs of TFSA RMB Working Group:

"Establishing the first offshore renminbi hub in North America for clearing and settling payments would represent a significant step in strengthening Canada's economic relationship with China and make Canadian companies more competitive. Canadian companies would benefit from reductions in costs associated with foreign exchange trading and currency hedging, and Canada would become even more attractive for international investors drawn to a diverse portfolio of trade and investor solutions offered in a stable, trusted, environment," said C.J. Gavsie, Managing Director, Global Head of Foreign Exchange Products & China Capital Markets, BMO Financial Group.

"In 2013, 18% of China's total global trade was settled in RMB compared with just 2% in 2010, and we expect the RMB to account for 30% of total China trade settlement by the end of next year," said Jason Henderson, Executive Vice President and Managing Director, Head of Global Banking and Markets, HSBC Bank Canada. "Further, in a recent survey we did of Canadian businesses, 74% said they plan to increase their trade with China. Becoming an integral part of the RMB offshore market will help to accelerate Canada's increasingly close relationship with China for the benefit of individual businesses in all parts of the country and the economy as a whole."

"Canada has long been renowned for having a sound and safe regulated financial system, which provides it with a significant advantage in establishing an offshore RMB center. The professionalism, scope and depth of the foreign exchange, capital and derivative markets; time zone connecting Asia-Pacific, Europe and America; robust legal environment; massive institutional investor base; and the booming trade between China and Canada all contribute to a brighter prospect of building a North American offshore RMB center in Canada. Developing an offshore RMB center requires both China and Canada to make their best effort to move forward. We are pleased to see that there will be joint efforts by the financial industry, business community and governments on this initiative," said Lijun Wang, President and Chief Executive Officer of Bank of China (Canada).

"The establishment of an offshore RMB center and the accompanying process will be one of the milestones in Canadian financial markets over the upcoming years, bringing new energy and elements to the country. With strong, ongoing interest from both government and businesses alike, Canada is well on its way in becoming a major RMB center in North America. The rapid development of a center enhances an even stronger partnership between Canada and China. We want to embrace this opportunity and work together with the public and private sector to encourage job opportunities and financial activities to flourish," said William Zhu, President and CEO of Industrial & Commercial Bank of China (Canada).


Canada seeks to become Renminbi (RMB) trading centre for the Americas - KCBD NewsChannel 11 Lubbock

 

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Ontario, B.C. teaming up to rally support for Chinese yuan trading hub in Canada


John Greenwood | August 27, 2014 | Last Updated: Aug 27 5:48 PM ET

PHOTOSTR/AFP/Getty Images China has already signed agreements to trade the yuan more freely with Singapore, London and Frankfurt as part of an economic restructuring that includes taking steps to loosen exchange controls.


A push to create a yuan trading hub in Canada is gaining momentum as countries around the world race to boost their share of trading in Chinese currency, which has grown dramatically along with China’s economy.

The Toronto Financial Services Alliance, a group made up of some of Canada’s largest banks and financial institutions, and a British Columbia business organization called AdvantageBC, announced on Wednesday that they have joined forces to promote Canada as a centre for yuan trading.

Instead of competing, the groups agreed to work together to build support for a single Canadian hub, seen essential to this country’s ambitions to increase trade with China.

Both groups realized that “we have greater likelihood of success if we do this as a collective,” said Janet Ecker, president of the TFSA.

Unlike other major currencies that trade freely on international markets, the yuan is tightly controlled by the Chinese central bank. Without officially sanctioned access to a supply of yuan, trade with Chinese companies can be expensive and complicated, so it’s not surprising that as Chinese global trade has exploded over the last few years, competition among countries for the right to set up a trading hub has also taken off.

This has “massive” potential benefits for Canada, said C.J. Gavsie, head of foreign exchange products at BMO Capital Markets and co-chair of the TFSA’s renminbi working group.

Canadian financial institutions, with the help of the Bank of Canada, have been working on the initiative for more than a year, and the ball is now in the federal government’s court to take the next step and engage the Chinese government, Mr. Gavsie said.

“There has got to be discussions between our government and their government,” he said. “The next step, which we hope will be soon, is that there is an agreement from both governments to undertake this initiative.”

A spokeswoman for the Department of Finance said Ottawa supports the plan and that “recent preliminary discussions” have taken place with Chinese officials. However, she declined to provide details saying only that that the negotiations are at an “early stage.”

“The exact details of the apparatus behind the hub will be worked out over time as negotiations progress,” Stephanie Rubec said in an email.

AdvantageBC is a non-profit business group whose members are a cross-section of the province’s economy, including Canfor Pulp International Ltd, Angiotech Pharamaceuticals, Salman Partners Inc., as well as most of the big Canadian banks.

The TFSA, whose mandate is to promote Toronto as a global financial centre, is a public-private partnership backed by the big banks and life insurers, the Canada Pension Plan Investment Board, the Rotman School of Management, and the Province of Ontario.

According to the TFSA, the yuan is the second-most popular currency in global trade finance “and is growing faster than any other currency in the world.”

“While Canada’s financial industry is headquartered in Toronto, much of the country’s Canada-China trade passes through Vancouver, making it critical for both jurisdictions to work collaboratively so that Canadian businesses are able to take full advantage of this initiative,” the two groups said in a statement.

If the groups are successful, Canada would be the first yuan trading hub in the Americas. Other yuan hubs include London, Frankfurt, Luxembourg, Hong Kong, Singapore, Taiwan and Sydney.

As it stands, Canadian companies buying or selling goods to China typically transact in U.S. dollars and as a result they end up paying multiple conversion costs. Not only is it expensive but for Canadian companies “it lacks transparency, meaning there is an inherent exchange rate margin that’s plugged into them and their suppliers,” said Mr. Gavsie.

Ontario, B.C. teaming up to rally support for Chinese yuan trading hub in Canada | Financial Post

 

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Why Canadian businesses should pay their Chinese partners in yuan

Chinese business willing to give discounts for yuan-denominated transactions

Aug 27, 2014 Murad Hemmadi

(Frederic J. Brown/AFP/Getty)

Businesses need to learn more about renminbi (RMB), because dealing in China’s currency could save them money according to a study from HSBC.

Trade with China totalled $73 billion in 2013, and a majority of Canadian companies intend to increase the volume of their business in the country. “Canadian Companies Leaving Renminbi on the Table” suggests that 55% of Chinese businesses would be willing to cut their trade partners a break of up to 5% if they denominated deals in yuan. But Canadian firms haven’t caught on to the opportunity:

Canadian companies are the least likely of those surveyed to use RMB for trade settlement. Only 5% of the Canadian businesses surveyed said they had conducted cross border transactions in the local Chinese currency, compared to 22% of global companies and 17% of US companies.

Dealing in the redback is a complicated process—China has historically maintained tight currency controls, and buying and selling yuan has to go through a renminbi exchange. But the Chinese government has liberalized its approach in recent years, lifting restrictions on cross-border trade denominated in RMB. The federal government has indicated its interest in a free trade deal with China, something that would undoubtedly take years to negotiate but would result in closer economic relations.

READ: The Renminbi goes mainstream »

And companies considering transacting in the Chinese currency could have an easier time if plans for an offshore renminibi hub in Vancouver are realized. The Toronto Financial Services Alliance and AdvantageBC today announced a partnership with Ontario, B.C. and federal government officials to promote a Canadian trading centre for the redback.

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A RMB clearing centre on our soil could boost trade with China by $500 million a year according to the Asia Pacific Foundation of Canada, and could attract more foreign direct investment from Canada’s second-largest trading partner:

China has a large and expanding pool of savings from its household, private, and government sectors. As capital controls are slowly removed, an important amount of those savings will be invested offshore. Canada has an opportunity to present itself as a destination of choice for Chinese investment.

READ: Here’s half a billion reasons we should build a renminbi trading hub in Vancouver »

But there are already opportunities to work in RMB. Several banks, including HSBC, offer yuan-denominated commercial savings accounts, and B.C. became the first foreign government to issue bonds in the RMB market, raking in $428 million from primarily Asian investors.

Business operating in China should follow premier Christy Clark’s lead and engage with the yuan. There’s money to be made in the redback—if you know how to use it.


Why Canadian businesses should pay their Chinese partners in yuan​

 

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And further support the all-increasing property bubble instigated by, you guessed it, an influx of foreign investors? And let's not forget the tendency for Canadian business to move to China once they find the undervalued currency advantageous in their Chinese markets.