First Yuan Hub In North America Facilitates Business For Global Traders
Vittorio Hernandez | | Mar 23, 2015 11:06 PM EDT |
(Photo : REUTERS/Petar Kujundzic) A photo illustration shows a $100 banknote placed above Chinese 100 yuan banknotes in Beijing.
A Canadian offshore trading center for yuan, China's currency, would facilitate business for companies trading with China and Canada. It is also expected to increase trade between the two nations.
The hub will serve as the first clearinghouse for the Chinese yuan or renminbi in North America, reports Globe and Mail. It launch on Monday includes the signing of a memorandum of understanding at the Metro Toronto Convention Centre, which is the fruit of long negotiations between Ottawa and Beijing.
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Included in the negotiations were central bankers from the two nations, and Ontario and British Columbia officials.
The hub will eliminate the U.S. dollar since there would be direct conversion between the Canadian dollar and the Chinese yuan. It would save money for Canadian companies that do business in China and would help increase Canadian presence in China, now the world's second-largest economy after the United States.
The savings would come from no loss in having to convert first to U.S. dollars as well as discounts that some Chinese firms sometimes offer to foreign companies that use the renminbi for their foreign transactions. An HSBC survey in 2014 found that 55 percent of businesses in China would offer discounts of up to 5 percent for companies that would transact in yuan.
Peter Hall, vice president and chief economist of Export Development Canada, explains, "By adopting the RMB as a payment currency, Canadian traders will have access to a wider universe of Chinese clients, and at the same time, improve their bottom lines," quotes Financial Post.
He adds that most Chinese traders are SMEs with no U.S. currency liquidity.
A study by the Canadian Chamber of Commerce reckon that because of the RMB trading hub, Canadian companies would save US$6.2 billion over 10 years and could potentially hike their exports by up to US$32 billion.
There was initially a tug-of-war between Ontario and British Columbia where would the hub be located, but because of the digital nature of the trading center, physical location became immaterial.
Tagsyuan, Financial Hub
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