Global Report

Here’s half a billion reasons we should build a renminbi trading hub in Vancouver

Currency clearing centre would lower costs for companies operating in China, attract investment

(Photo: Teh Eng Koon/AFP/Getty Images)

(Teh Eng Koon/AFP/Getty)

Establishing a Canadian offshore trading hub for the renminbi (RMB) could boost trade with China by $500 million a year, according to the Asia Pacific Foundation of Canada. British Columbia has enthusiastically welcomed the prospect of such a centre being built in Vancouver.

The U.S. dollar is the currency of choice for most of the trading world, but China is increasingly looking to internationalize the RMB, also called the yuan. The government is encouraging foreign investors to hold RMB-denominated assets, and dealing in the country’s domestic currency allows businesses operating in or trading there to minimize transaction costs.

The “redback” is the world’s fastest-growing currency, and Deborah Stokes says the Chinese government is paving the way:

Beginning in earnest around four years ago, Beijing engineered a series of liberalization moves to allow the renminbi to catch up to the economic status of its homeland, now the world’s second-largest economy. For example, most of the restrictions on cross-border buying and selling goods in RMB have now been lifted. Renminbi investing options have also opened up. Foreign banks now offer an array of RMB products and services; you can open an RMB account in Canada today.

READ: The Renminbi goes mainstream »

A Canadian RMB currency hub would allow banks and businesses to use the renminbi in China, a potentially significant saving to importers with local suppliers. And it could help attract more Chinese money to Canada, according to the Foundation’s report:

China has a large and expanding pool of savings from its household, private, and government sectors. As capital controls are slowly removed, an important amount of those savings will be invested offshore. Canada has an opportunity to present itself as a destination of choice for Chinese investment.

Vancouver is the logical place to host a renminbi hub in Canada. The city has a large Chinese-speaking population and has long been regarded as a gateway to the Pacific. With no offshore hubs yet established in North America, a Vancouver centre could attract a sizeable chunk of the international yuan market, which currently mostly runs through Hong Kong.

READ: Edmonton and Calgary put Vancouver’s economic development efforts to shame »

But Vancouver will need to act quickly: San Francisco is angling to be the first North American RMB hub as well, and recent entrants Frankfurt and London will not give up their newfound share of the currency market easily. If the city is successful, expect to see a little more red in Canadian wallets in the near future.