Canada and China have signed a reciprocal currency deal that’s expected to dramatically boost exports.
The hub will foster far easier trade between the Canadian dollar and the Chinese yuan, also known as the renminbi. It makes Canada the first country in the Americas to have a deal to trade in the renminbi.
The deal was announced Saturday by Prime Minister Stephen Harper and Premier Li Keqiang in Beijing.
Authorized by China’s central bank, it will allow direct business between the Canadian dollar and the Chinese yuan, cutting out the middle man — in most cases, the U.S. dollar.
Canadian exporters forced to use the American currency to do business in China are faced with higher currency exchange costs and longer waits to close deals.
Jason Henderson, head of global banking for HSBC Canada, calls the deal great news for Canada given China is the second largest economy in the world after the U.S.
If Canada is to maintain the standard of living that it enjoys today, he adds, it needs to tap into the Chinese market. The currency deal is the first step on that path.
The Toronto Financial Services Alliance (TFSA) welcomes the new agreement.
“We are very pleased that the federal government recognized the importance of this initiative to Canada’s economy and worked with the financial industry to help make it happen,” said Janet Ecker, president and CEO of the TFSA.
“Not only will this initiative help facilitate increased investment and trade and strengthen Canada’s broader economic relationship with China, it will also continue to raise the Toronto region’s stature as a global financial centre,” Ecker said.
— With files from IE Staff