OTTAWA, March 23, 2015 /CNW/ - Export Development Canada (EDC), Canada's trade finance agency, and the Industrial and Commercial Bank of China (Canada)(ICBK), today agreed to work together to promote the use of Renminbi (RMB) as a currency of settlement in trade-related transactions.
The agreement comes at the same time that Canada's RMB trading hub, the first in the American continents, is being launched.
The two trade-focused financial institutions will look to facilitate transactions in RMB where it makes the most sense for all parties.
The memorandum of understanding was signed today at the official ceremony to launch the RMB hub in Toronto, Canada, by Mairead Lavery, Senior Vice-President, Business Development, EDC and Mingxuan Zhu, President and CEO, ICBK.
"As the second largest trading partner, export destination and source of imports for Canada, China contributes enormously to Canada's GDP. According to Swift, RMB is now the fifth most-used currency for international payments," said Mr. Zhu. "Our bank group is a leader and pioneer in the RMB market, and ICBK is pleased to work with EDC for RMB's internationalization."
"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," said Ms. Lavery. "ICBK and EDC will be looking at ways to make the transactional aspect of Canadian and Chinese trade a little less cumbersome."
Currently, doing business in RMB can be time consuming and costly for Canadian companies, and, accordingly, hedging against currency risk is very challenging.
Canadian banks currently settle trade payments through foreign subsidiaries with RMB hubs, usually Singapore on the eastern hemisphere and London on the western side.
In order to do so, they must often first convert from Canadian dollars into U.S. dollars before closing in RMB, adding costs to clients.
A recent report by the Canadian Chamber of Commerce calculated that establishing an RMB hub could boost Canadian exports to China by as much as $32-billion and save importers $2.8-billion in transactions over 10 years.
The chamber report identified forestry, agriculture, mining and aerospace as the export sectors most likely to benefit from dealing directly in RMB.
Two-way trade between Canada and China amounted to 77 billion in 2014.
For more information on how EDC can help your company, contact 1-888-434-8508 or visit www.edc.ca
EDC is Canada's trade finance agency, providing financial services for companies that buy from Canadian companies, directly or through their corporate value chains. EDC's financing can be used for capex and/or project finance requirements, either through bilateral or syndicated corporate facilities. Operating on commercial principles, EDC has a partnership-preferred philosophy to collaborate with private-sector financial institutions to share risk and create greater capacity for Canadian trade transactions.
Industrial and Commercial Bank of China (Canada), a Canadian Subsidiary of Industrial and Commercial Bank of China Limited (ICBC), headquartered in the financial district of Downtown Toronto. The bank is currently operating a network of eight branches. ICBK is dedicated to providing one-stop shop of multinational financial services. The bank also earns great reputation through providing excellent, comprehensive, and efficient financial services to private, corporate and institutional clients. As a pioneering in building a sound and solid bridge for further economic and trade co-operation between China and Canada, ICBK will continue to support the business development of Chinese and Canadian enterprises.
On November 9, 2014, People's Bank of China (PBOC) has decided to authorize the Industrial and Commercial Bank of China (Canada) to serve as the RMB clearing bank in Toronto.
SOURCE Export Development Canada