Evidence of meeting #67 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was chinese.
A recording is available from Parliament.
10:05 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
But if he's selling wine or if Quebec is selling wine and the agreed price is $10 U.S. a bottle, what kind of conversion needs to be done? The Chinese have—what?—$4 billion of American money in their banks? Why would there be that advantage? I don't understand.
10:05 a.m.
Senior Director, Economic, Financial and Tax Policy, Canadian Chamber of Commerce
Well, first it's the conversion costs from the double conversion. That alone is about 1%.
10:05 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
You're missing my question. If the price is $10 U.S., since they have lots of U.S. dollars, why don't they just give them $10? Then the transaction is done and they have $10 U.S. that they can spend right next door. I don't understand what the advantage is.
10:05 a.m.
Senior Director, Economic, Financial and Tax Policy, Canadian Chamber of Commerce
You're right; there are certain companies that are perfectly happy to pay in U.S. dollars. What we're saying is that for certain companies in China it is sometimes easier to borrow in RMB than it would be to borrow U.S. dollars.
10:05 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Do you stand by your statement that it's better for them to get RMB than U.S. dollars? Are you saying that?
10:05 a.m.
Senior Director, Economic, Financial and Tax Policy, Canadian Chamber of Commerce
That's why we're saying that in certain circumstances they can do more business. If you're a retailer—
10:05 a.m.
Conservative
10:05 a.m.
Senior Director, Economic, Financial and Tax Policy, Canadian Chamber of Commerce
No, you're right. It may not be ideal for Peller Estates; that's true.
10:05 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Okay.
I want to go to Mr. Harder. He has had lots of experience.
I looked at your dossier, and it's quite remarkable, sir.
There's a huge advantage, you have to confess, in having a dominant dollar, a trading dollar. Everybody trades with the U.S. dollar. I can see that the Chinese might love to have this dominance removed, but isn't that something—I asked this question last week and didn't get an answer—that the United States would guard against fiercely, the possibility that they might lose that prominent position?
10:05 a.m.
Policy Adviser, Dentons LLP, and President, Canada China Business Council
I'm not a monetary economist but the global trends are clear. The RMB has been a more used currency in the past number of years. I don't have the precise percentage now of international commerce in RMB, but it has to be 23% or so.
10:05 a.m.
Senior Director, Economic, Financial and Tax Policy, Canadian Chamber of Commerce
Yes, in trade financing—
10:05 a.m.
Policy Adviser, Dentons LLP, and President, Canada China Business Council
Yes, and with liberalization of the RMB, which will come, it will become a reserve currency. It already is being held by a number, and there will be a normalization over a long period of time.
What we are talking about in the RMB conversion settlement issue is not really about currency and reserve currency, it's about transaction costs, and SME transactions are often beginning and ending in the local respective currencies. The price is set at the U.S. dollar currency, which creates a lot of friction costs in trade, and that's what we are eliminating.
10:05 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Let's go there first and let's talk about SMEs. There has been a lot of talk about the advantages for SMEs in being able to trade. I can understand the Australians, being of close proximity—
10:05 a.m.
Policy Adviser, Dentons LLP, and President, Canada China Business Council
Vancouver is closer than Sydney.
February 19th, 2015 / 10:05 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Vancouver is, but we're a whole lot closer to the U.S.A. and it's been to our advantage to have that currency.
I'm a little bit puzzled. Like you, I'm certainly not an economist. I'm just a country boy but I've run a business and I'm doing a little bit of farming. Somebody made the statement—it was you, sir—that the Chinese offered Canada an agreement. You're absolutely right; we need to start selling our barley and our wheat and we need to have that market. I raised that with the Chinese gentleman as well. Are you saying that the Canadian government said that we're too busy to do that?
10:10 a.m.
Policy Adviser, Dentons LLP, and President, Canada China Business Council
That was what Mr. Fast said when asked. He said we're preoccupied; we have other priorities.
10:10 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Okay. I have talked to the Minister of Agriculture and Agri-Food and he has assured me that he has made a number of trips—
10:10 a.m.
Policy Adviser, Dentons LLP, and President, Canada China Business Council
He's great.
10:10 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
He has been making this a top priority, but it seems to be that the Chinese, and God bless them, are good business people, but they do use strategic practices to favour one and let the other one go by the wayside. Is this something that's going to enable us to sell wheat and barley more easily to the Chinese?
10:10 a.m.
Policy Adviser, Dentons LLP, and President, Canada China Business Council
On this transaction, the RMB standard or not, my point is that we need to have a broader architecture of engagement, and in the complementarity study, both sides, Canada and China, identified sectors in which they would both benefit from by lowering tariffs, and I'm saying we should get on with that.
10:10 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
I want to go to Mr. Hopkins.
Mr. Chair, what...?
10:10 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Okay, I want you to clarify something. When you talk about the bond, in essence you're saying that you've raised money to finance operations in B.C. Is that correct? It's a bond market. Basically, that's what governments do, so rather than get it from traditional banks, you went to China and borrowed the money from China. For the lay term, is that a fair description?
10:10 a.m.
Assistant Deputy Minister, Provincial Treasury, British Columbia Ministry of Finance
That is correct, except in this case we did our RMB bond as a matched book trade where we borrowed the proceeds in RMB and actually invested those proceeds into an RMB-denominated investment, so we didn't use the proceeds in this particular case for financing capital spending here in British Columbia. Rather we did it as what we call a matched book trade. We do that from time to time in running our liability management program.
10:10 a.m.
Conservative
The Chair Conservative James Rajotte
Thank you very much, Mr. Van Kesteren.
Colleagues, we have three motions that we have to deal with today, but I did want to get one question on the record and I would like to get a brief response today, and perhaps our witnesses can follow up.
Mr. Brock, in your presentation you talked about China being a saving nation with an enormous pool of capital available to companies and governments. Then you talked about EDC, and Mr. Hopkins as well talked about the bond issue, which Mr. Van Kesteren just mentioned, but then you said we can't wait to see the first Canadian business raise renminbi funds.
So my question is to ask you to expand on that to say how and then to address the specific issue of whether mainland Chinese investors will be able to invest, not as institutional investors but as investors in issues issued by the Canadian stock exchanges.
This is a question I'll follow up with the Toronto Financial Services Alliance, but I wanted to get you to expand on that as well.