Vancouver makes its pitch to become a renminbi hub

Jacob Parry | NOV 10, 2014

IMAGE BY: BC GOV

B.C. Minister of Finance Mike de Jong at a press conference in Beijing.

A renminbi hub in Vancouver could stimulate business by Chinese companies, according to the Vancouver Economic Commission

As a proposal for a renminbi hub in Canada inches closer to fruition, the Vancouver Economic Commission is making the case in a new report that a banking hub on the West Coast, hence far from Bay Street, makes sense.

The hub, an official designation that would designate a Vancouver-based bank, mostly HSBC Canada or the Agricultural Bank of China's Canadian branch, would act as a clearing house for direct transactions between the Canadian dollar and Chinese renminbi.

"Vancouver is a natural fit—geographically, historically and economically," said Ian McKay, CEO of the Vancouver Economic Commission, in a statement. 

"Welcoming an RMB hub to our city will provide not only additional incentive for Chinese companies to do business here, but also a competitive edge for local companies accessing Asian markets."

Among the advantages for Canadian companies: reduced supply chain costs, increased bargaining power when bidding for contracts in China, and lower transaction costs.

The B.C. government has worked hard to draw Chinese companies to B.C., incentivizing foreign banks with tax breaks and raising the province's profile in China through an issue of Yuan-denominated bonds. Nonetheless, the establishment of a future Renminbi hub rests largely in the hands of the federal government.

The federal Department of Finance appears "increasingly committed" to an RMB hub and is currently in meetings with its Chinese counterparts, according to their report.

An announcement of federal government support, or even some form of an agreement, could have followed a bilateral meeting at Chinese President Xi Jinping's APEC Summit in Beijing. Prime Minister Stephen Harper, as of Wednesday, no longer plans to attend the summit. 

Trade between Canada and China increased by 4.5 per cent in 2013, reaching 73.2 billion, but overall the use of renminbi by Canadian companies is extremely low compared to their American or Australian counterparts.