TORONTO - North America's first trading hub for China's currency, the renminbi, will strengthen the trade relationship between Canada and the Asian economic powerhouse, federal Finance Minister Joe Oliver said Monday.
"There is tremendous potential to grow this trade relationship," Oliver said at the Toronto launch of the trading hub's clearing function.
"China is expected to be the world's largest economy by 2020. The Chinese middle class is expanding dramatically — and a market of 1.4 billion people represents an enormous opportunity for Canadian businesses."
Oliver also said the two countries have complementary needs in the resources sector.
"We need to diversify our markets and China wants to diversify its sources of supply," Oliver said.
The off-shore, virtual trading hub will allow for faster conversion of Canadian dollars into the renminbi, also known as the yuan.
However, the trading hub does not yet allow for a direct conversion, Oliver said. Canadian dollars are first translated into another currency, such as U.S. dollars. Oliver said he is hoping that the hub will be able to convert directly from the Canadian currency to the Chinese one within several months.
"That comes later," Oliver said. "There's a step or two that's being eliminated, and then we expect that there will be a direct conversion relatively soon."
The move is intended to help Canadian companies save on exchange costs and to increase trade between the two countries.
It will also make Canadian exporters' goods more attractive to Chinese companies that prefer to pay in renminbi.
The Industrial and Commercial Bank of China (Canada) has been designated as the RMB clearing bank in Toronto.
The deal to establish a renminbi trading hub was announced during Prime Minister Stephen Harper's trip to China last fall.
During the launch event, Export Development Canada and the Industrial Commercial Bank of China also signed a memorandum of understanding to promote the use of the renminbi in trade transactions.
"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," Mairead Lavery, senior vice-president of business development at EDC, said in a statement.
"ICBK and EDC will be looking at ways to make the transactional aspect of Canadian and Chinese trade a little less cumbersome."
A report by the Canadian Chamber of Commerce said that creating the trading hub could boost exports from Canada to China by as much as $32 billion.
And Canadian exporters could save as much as $2.8 billion in transaction costs over a decade.
Ontario Finance Minister Charles Sousa said the hub will give Canadian businesses access to "stable and predictable RMB exchange rates."
"This trading hub will also help strengthen Ontario's competitive position," Sousa said.
"It will build emerging market expertise. It will facilitate an increase investment and trade, and overall, it will strengthen Ontario and Canada's broader economic relationship with China."