Increasing Renminbi Trade, Commerce and Investment between Canada and China
8 November 2014
Canada and China have agreed to a set of measures to support the increased use of renminbi (RMB) in trade, commerce and investment between the two countries.
The following measures will facilitate the stable and healthy development of the RMB market in Canada and will help establish North America’s first offshore RMB centre in Canada:
- The Bank of Canada and the People’s Bank of China agreed to establish a reciprocal currency swap line.
- The Bank of Canada and the People’s Bank of China (PBoC) agreed to a Memorandum of Understanding on RMB clearing that will see the PBoC designate an RMB clearing bank in Canada. The designation of Canada as an offshore RMB clearing centre will benefit Canadian financial service providers in all financial centres of Canada.
- Chinese regulators have granted an initial Renminbi Qualified Foreign Institutional Investor (RQFII) quota in the amount of 50 billion RMB to Canadian financial institutions.
Currency Swap Line
The Bank of Canada and the People’s Bank of China have entered into a reciprocal currency swap for a maximum amount of 200 billion RMB, with a reciprocal maximum of $30 billion Canadian. This swap line will support the establishment of the clearing bank and would enable the Bank of Canada to provide emergency liquidity in RMB to support Canadian institutions should market conditions warrant it.
Designated Clearing Bank
The People’s Bank of China will designate a clearing bank to clear and settle RMB transactions between Canada and China directly in China’s payments system. Canadian financial institutions will be able to use the services of the designated clearing bank to process RMB-denominated payments for their customers.
The experience in other jurisdictions has shown that a designated clearing bank facilitates the development of the range of financial products and services denominated in the Chinese currency. Such product development would further aid the ability of Canadian firms to do business in China.
Canada will be the first country in the Americas to have an RMB clearing bank designated in its jurisdiction.
Renminbi Qualified Foreign Institutional Investor Quota
The RQFII program allows investors outside of mainland China to access a multitude of financial instruments in China’s capital markets though investment options offered though a licensed financial institution.
Chinese regulators have granted Canada a quota of 50 billion RMB. Canadian financial institutions can apply for a share of this quota to offer RMB-denominated investment services to Canadian and other investors.