Canada-China Ties Deepen With Renminbi Trading Hub
China’s growing global financial influence has skeptics, requires reforms to keep pace
Canada and China officially opened the first North American renminbi trading hub in Toronto on Monday, March 23, amid other initiatives that are poised to give the Asian power greater financial influence internationally. These developments give skeptics ongoing concerns about China’s ultimate objectives and are not limited to those regarding its control of yuan trading, capital market reforms, and lack of transparency.
The hub was the result of several months of work since Prime Minister Stephen Harper brokered a deal for Canada to be the first such trading center in North America. Through the Industrial and Commercial Bank of China (ICBC), the designated clearing bank, making and receiving payments in renminbi, also known as the yuan, is now easier for Canadian businesses.
For certain, this is good news for Canadian businesses that can now lower their costs in renminbi transactions, principally instead of using the U.S. dollar as a go-between. It increases the global competitiveness of Canadian firms that deal with Chinese firms. It also bodes well for the Canadian banks that can roll out more products, such as renminbi deposit accounts, and earn fees.
“A rapid build-up of expertise in renminbi liquidity could have significant benefits for our world-class financial industry,” said Canada’s finance minister Joe Oliver on Monday. “This is an opportunity for Canada’s financial sector, but also for China’s.”
Canadian exports to China have more than quadrupled since 2003, totalling $78 billion in 2014, and foreign direct investment between the two nations has gone up more than seven-fold between 2005 and 2013, to a total of $21.5 billion. China, the world’s second-largest economy, is Canada’s second-largest trading partner after the U.S.
