Renminbi payments between China and Canada are up 213% on two years ago, after the country became the first Americas clearing hub for the Chinese currency.
10.2% of payments between China or Hong Kong and Canada were settled in Rmb in March 2015, up from 3.9% in March 2013, reflecting a global trend of the currency’s increased usage.
In March, Toronto became the first city in the Americas to allow direct clearing in Rmb, with the Industrial and Commercial Bank of China (ICBC) becoming the clearing bank.
In the same month, the Rmb returned to the top five global settlement currencies, after falling out of the upper echelons for a couple of months prior. This still amounts to just 2.03% of global payments, but the exponential growth suggests it will expand its share of the market soon.
“As a long-time supporter of the Rmb, Canada has maintained a steady position in the top 20 offshore countries using the Rmb for payments. Canada’s new status as a clearing centre should help boost its rank among offshore Rmb countries as more Canadian-based companies now have the opportunity to trade with China using the Rmb,” says the CEO of Swift in Canada, Chris Church.
Analysts are expecting the pace of liberalisation to quicken. Kelvin Lau, senior economist for Hong Kong at Standard Chartered, likens the situation to “bridges and traffic”. He tells GTR: “Over the last couple of years they have been aggressively expanding the bridges that allow Rmb to go in and out of China. They’ve been controlling the amount of traffic that goes through it. Going forward they’ll look to utilise the existing bridges they’ve built but to allow more traffic on them. It’s all about more bridges and traffic.”
He expects there to be further announcements on new Rmb clearing hubs in the near future. In April, Doha of Qatar followed Hong Kong, Macau, Singapore, London, Frankfurt, Paris, Luxembourg, Seoul, Sydney and Toronto in opening such a facility.
Banks also welcomed the uptick in Rmb usage, with HSBC’s head of commercial banking for Canada, Linda Seymour saying: “The increase in payments made in Asian currencies, including Rmb, demonstrates the increasing comfort Canadian companies have transacting with the region. Canadian companies are embracing trade with Mainland China. In our recent survey, we found 62% of Canadian companies surveyed expect to increase trade with Mainland China in the next 12 months – down slightly from 74% in 2014.”