Canada’s new RMB hub advantages
Ontario’s Finance Minister said that Canada becoming the first RMB trading hub for the Americas will enable Canadian businesses to improve their productivity and stimulate economic growth across Canada.
Charles Sousa made his comments on May 28 at an event hosted by Bloomberg with the theme: ‘China – Navigate the New Silk Route – Taking Advantage of Canada’s New RMB Hub.
On March 23 Canada launched its RMB hub and became the latest to join the growing number of such centers around the world, spurred by China’s strong push to see its currency used on a global scale.
The hub reinforces Toronto’s stature as North America’s second-largest financial center behind New York City, and is expected to support increased trade between China and Canada that has seen the Federal government and provincial governments stepping up trade and investment activities with Chinese interests in recent years.
The Toronto RMB hub serves as conduit for 24-hour coverage of global renminbi transactions, enabling businesses to convert Canadian dollars directly into Chinese currency.
The use of renminbi for global trading transactions including payments has continued to accelerate and grow. Over a relatively short period of time, it has become one of the most actively traded currencies.
As of March, there were 15 RMB hubs around the world, and with Canada being the only center in the Americas, it will provide investors from Americas more efficient access to China, according to Sousa.
Tom Orlik, Beijing-based chief Asia economist for Bloomberg, said the role of yuan as an international currency has been happening since 2009 and “it is difficult not to be impressed with its growing role as international reserve currency”.
In his talk, China Macro Outlook 2015, Orlik said: “The question of when will Chinese yuan become an international currency, has an answer … it is already happening.”
He said the Chinese economy headed into 2015 marked by slower economic growth, but the central government has taken steps to prevent it from slowing down and avoiding any chance of the yuan depreciating further.
“There is a question whether the yuan would become a channel for stimulus but there could be issues of yuan stability and mild depreciation. There also have been questions when it could significantly become a global reserve currency. Is it less than a year or would it be more than five years for the yuan to reach that situation?” he asked.
Another question is whether the International Monetary Fund would allow the yuan a place in its SDR basket.
“This would be a policy decision. The case is not clear cut,” Orlik said.
Orlik is optimistic about China’s on-going reforms, saying the central government had been very aggressive when it comes to the exchange rate, interest rate and economic and financial liberalization.