(OTTAWA) – March 23, 2015
Export Development Canada (EDC), Canada’s trade finance agency, and the Industrial and Commercial Bank of China (Canada) (ICBK), today agreed to work together to promote the use of Renminbi (RMB) as a currency of settlement in trade-related transactions.
The agreement comes at the same time that Canada’s RMB trading hub, the first in the American continents, is being launched.
The two trade-focused financial institutions will look to facilitate transactions in RMB where it makes the most sense for all parties.
The memorandum of understanding was signed today at the official ceremony to launch the RMB hub in Toronto, Canada, by Mairead Lavery, Senior Vice-President, Business Development, EDC and Mingxuan Zhu, President and CEO, ICBK.
“As the second largest trading partner, export destination and source of imports for Canada, China contributes enormously to Canada’s GDP. According to Swift, RMB is now the fifth most-used currency for international payments,” said Mr. Zhu. “Our bank group is a leader and pioneer in the RMB market, and ICBK is pleased to work with EDC for RMB’s internationalization.”
“At its core, the relationship with ICBK is about laying the groundwork to help make it easier for Canadian companies with business interests in China to manage their currency exchanges and their Chinese market financing,” said Ms. Lavery. “ICBK and EDC will be looking at ways to make the transactional aspect of Canadian and Chinese trade a little less cumbersome.”
Currently, doing business in RMB can be time consuming and costly for Canadian companies, and, accordingly, hedging against currency risk is very challenging.
Canadian banks currently settle trade payments through foreign subsidiaries with RMB hubs, usually Singapore on the eastern hemisphere and London on the western side. In order to do so, they must often first convert from Canadian dollars into U.S. dollars before closing in RMB, adding costs to clients.
A recent report by the Canadian Chamber of Commerce calculated that establishing an RMB hub could boost Canadian exports to China by as much as $32-billion and save importers $2.8-billion in transactions over 10 years.
The chamber report identified forestry, agriculture, mining and aerospace as the export sectors most likely to benefit from dealing directly in RMB.
Two-way trade between Canada and China amounted to 77 billion in 2014.
EDC is Canada’s trade finance agency, providing financing and insurance solutions locally and around the world to help Canadian companies of any size respond to international business opportunities. As a profitable Crown corporation that operates on commercial principles, EDC works together with private and public-sector financial institutions to create greater capacity for Canadian companies to engage in trade and investment.
For more information about how we can help your company, call us at
1-888-434-8508 or visit www.edc.ca.
Export Development Canada