Canada has 4 years to cap­i­tal­ize on ren­minbi hub: Chi­nese banker

China Daily (Canada) - - FRONT PAGE - By RANDALL PALMER Reuters

Canada will have only three or four years to take ad­van­tage of its ren­minbi clear­ing hub be­fore China lib­er­al­izes its cap­i­tal ac­count and so re­duces the com­pet­i­tive ad­van­tage the hub cre­ates, a Chi­nese banker key to the op­er­a­tion said on Tues­day.

Dur­ing Canadian Prime Min­is­ter Stephen Harper’s visit to China in Novem­ber, it was an­nounced that a clear­ing hub for the yuan, or ren­minbi, would be es­tab­lished in Toronto, the first such hub in the Amer­i­cas.

The Canadian sub­sidiary of the Industrial and Com­mer­cial Bank of China Ltd has been des­ig­nated as the hub’s clear­ing bank, and the pres­i­dent of the Canadian unit, Wil­liam Zhu, de­scribed the time chal­lenge to the House of Com­mons fi­nance com­mit­tee on Tues­day.

That chal­lenge is a “quite limited time win­dow for us to im­ple­ment it be­cause China is lib­er­al­iz­ing (its) cap­i­tal ac­count I guess in the fu­ture three or four years,” Zhu said.

“So we’ve only got four years to take ad­van­tage of (the) ren­minbi clear­ing cen­ter to fully uti­lize our com­pet­i­tive ad­van­tages.”

Zhu an­nounced a March 23 launch­ing cer­e­mony for the clear­ing func­tion of the Canadian hub, which will en­able com­pa­nies trad­ing with China to set­tle trans­ac­tions in the Chi­nese cur­rency it­self, rather than hav­ing to use the US dollar or other cur­ren­cies as in­ter­me­di­aries. Speak­ing to re­porters, Zhu urged Canadian banks to de­velop a full suite of prod­ucts in ren­minbi.

Zhu also said that since Canada is only a medi­um­sized mar­ket, the hub will need to link up with com­pa­nies through­out North and South Amer­ica to gen­er­ate larger trad­ing vol­umes.

Dur­ing the same com­mit­tee tes­ti­mony, Bank of Canada of­fi­cial Paul Chilcott de­scribed the use of the swap agree­ment set up in Novem­ber be­tween the Canadian cen­tral bank and its Chi­nese coun­ter­part, the Peo­ple’s Bank of China.

The agree­ment, which would al­low for the swap of Canadian dol­lars for up to 200 bil­lion yuan ($32.0 bil­lion US), is in­tended only as a last re­sort to sup­port the sta­bil­ity of the Canadian fi­nan­cial sys­tem, not to pro­vide credit back­stop for any par­tic­u­lar in­vestor.

A bank em­ployee

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