Currency swap agreed with Canada
Print Edition
THE central banks of China and Canada yesterday agreed to a currency swap worth 200 billion yuan (US$32.7 billion), the Canadian government said in a statement issued at a meeting of Asia-Pacific nations.
The swap will be effective for three years, according to a separate statement from the People’s Bank of China.
The deal was announced after Chinese Premier Li Keqiang met Canadian Prime Minister Stephen Harper.
China’s central bank will also appoint a clearing bank — to be based in Toronto — for the yuan as part of a memorandum of understanding, the statements said.
The currency swap will help set up the clearing bank, and allow the two banks to swap currencies if needed to ease trade and investment.
The yuan clearing bank will be the first in the Americas, and will allow Canadian financial institutions to process payments in the Chinese currency.
“This is a fantastic announcement for Canada and China relations, a terrific move for Canadian businesses to be able to compete more abroad,” said C. J. Gavsie, managing director of foreign exchange sales at BMO Capital Markets.
China will also give Canadian investors the right to invest up to 50 billion yuan initially in China’s capital markets.
The quota will be granted under the Renminbi Qualified Foreign Institutional Investor scheme.
That program, launched in 2011, allows financial institutions to use offshore yuan to invest in the mainland’s securities markets, including in stocks, bonds and money market instruments.
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