Evidence of meeting #69 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was renminbi.
A recording is available from Parliament.
9:55 a.m.
Principal Officer and General Manager, Toronto Branch, China Construction Bank
No, it's a different market. Canada is a different market because of the currency. The RMB hub, especially for the currency you want to set up for the RMB centre, is between Canadian dollars and the RMB. It has no effect on other markets, like London.
9:55 a.m.
NDP
Raymond Côté NDP Beauport—Limoilou, QC
Okay.
You mentioned that the Chinese government will implement a new clearing system for the renminbi by 2016. Could that new system be described as a single step to make the renminbi more fluid outside China?
9:55 a.m.
Principal Officer and General Manager, Toronto Branch, China Construction Bank
Yes, because China is now developing a new system. It's the settlement and clearing system.
Under this system, all clearing banks, including the Toronto clearing bank, including us, can link to this system directly so the transaction can be done, whereas now it is mostly in the future.
It will be better than it is right now. Currently, all clearing banks, including other countries, including London's clearing bank, have to go to their home bank's system and then link to the Chinese central bank system. After this new system is launched, they can link to this system directly. There will be no need to go through a third party system.
9:55 a.m.
NDP
Raymond Côté NDP Beauport—Limoilou, QC
Excellent.
Mr. Curtis, we are going to use some mathematical data.
I won't hide the fact that I was kind of surprised when I learned about the volume of renminbi transactions around the world and by the fact that the Chinese currency is being used much more broadly. There seems to have been exponential growth. Although the current volume is still fairly low compared to the U.S. dollar, the growth has been significant, despite the somewhat restrictive regulations. Is that your take on the subject, as well? We can expect developments. Obviously, I fully agree with you that forecasts are something extremely risky. We know that in economics. Many economists have made incorrect predictions.
Still, could we expect that this growth in the volume of transactions, which we could call exponential, will continue and make the renminbi a heavyweight on international markets within just a few years?
9:55 a.m.
Consultant and Adjunct Professor, As an Individual
One should take into consideration the fact that the base was very low, the amount of use of the RMB and yuan was very low at the beginning. Even if it triples, which it has done in the last three years, it's still 8% to 12%, for example. That's an increase.
It looks big in numbers, but in fact, if you look at the whole picture, which is what I was trying to do in my original presentation, it's significant but not that significant. That's probably the fairest way to put it. Bringing the RMB, given the size of Chinese's trade and investment—it's now the world's second-largest economy—it's bringing China, with the support of the Chinese government, into the world, and we will see more of this as time goes on.
9:55 a.m.
NDP
February 26th, 2015 / 9:55 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Thank you, Chair.
Thank you all for being here. It's a fascinating discussion.
Mr. Curtis, I love that story you had of 1949. That's fascinating to hear, the remarks of the entry into the new world with the Chinese revolution. That's before I was born, but I remember as a boy reading about the Chinese revolution and the Russian revolution. It's fascinating stuff. That first part of the revolution really lasted about 30 years. It's remarkable when you think about it. We think about that as such a long time, but the second part of the revolution really intrigues me.
I was privileged to go to China twice. I went the first time to Beijing. The second time I was able to go to Shanghai. I think you've probably been there, and a lot of people have. We were taken up that tower in Shanghai—I forget the name. When we were finished, they took us down to the basement. They didn't take us to the bottom; they took us to the basement. They gave us a history lesson. I don't know if you've seen it. It's fascinating. We saw 5,000 years of Chinese history, which is remarkable. There's nothing more remarkable in the world, I don't think, actually.
Then they showed the turn of the 20th century with the Boxer revolution and the servitude. You saw the little guys carrying the rickshaws and the Western women in their attire. Then they went right from there to 1980—actually it was 1970. So the picture stopped. They starting showing Shanghai. They skipped that whole part of the Chinese revolution, which told me something. I remember the story about the.... I don't know if this is factual. They asked a Chinese general after the revolution what he thought about the French revolution. He said it was too early to tell. It gives you a glimpse of the Chinese, and they're remarkable people. They have amazing capabilities.
It's quite obvious that this is something that's going to be of great benefit to the financial sector, but I am concerned about the manufacturing sector. I think most of us recognize that the Chinese were able to take a large part of it, not only in Canada but throughout the world. It seems that we've reached possibly an equilibrium, I don't know. But I want to know how this is going to benefit what we have left. I understand that we're able to trade in B.C. I congratulate you for that. With your proximity, you're able to do some great trading with the Chinese, but what about the rest of Canada? For the rest of Canada, the people in my riding who manufacture goods, is this going to help us? Is this something that is going to be able to increase our trade with the Chinese, and will the Chinese begin to trade with us and start to buy the parts that we're good at making? Maybe just give us your take on that.
10 a.m.
Consultant and Adjunct Professor, As an Individual
Chair, am I allowed to talk about international trade for a few moments? It's partly relevant to your discussions, but I want to be careful.
10 a.m.
Consultant and Adjunct Professor, As an Individual
Ultimately trade and the use of trade finance, of which it is a portion, is very important to commercial transactions worldwide. Canadian firms, large and small, are involved in what we call global value chains. There are bits and pieces done in southern Ontario, some of it is done in B.C., some of it is done in Palo Alto, and some of it is done in Brazil. All work together, including stuff that goes off to China and comes back from China. I think probably to make a point, the easier it is for a Canadian-based operations to participate in these global value chains, supply chains, no matter where they're based ultimately, the more it will encourage the growth of these companies, large and small, in Canada. It won't necessarily be Canada to China. It could be Canada via Europe or Canada via the U.S. It will be the bits and pieces put together, off they go to China, and vice versa.
China is, as I said moments ago, becoming part of the world. It's wanting to be part of the world and it's moving up its high technology very quickly. What has to happen, briefly, in Ontario and in other parts of Canada is to focus on the higher value-added. Where is our intellectual property? What could we bring to bear over and above our important resources to in fact compete with China? That's where our strength is. It's not making toys and Christmas lights any longer. It's in fact making high technology, aerospace kinds of things, for example, telecommunication things, and information things. That's where the future is, and I think the more we do that, the more supported by the Canadian financial sector, the better off we'll be.
10 a.m.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Are we going to be okay? I guess that's the question. That's what people want to hear.
10:05 a.m.
Conservative
Mark Adler Conservative York Centre, ON
Thank you very much, Chair.
Thank you, witnesses, for being here today.
I was happy to hear you say, Mr. Curtis, that we have a surplus in our balance of payments when it comes to services. I was glad you said that.
I do want to first of all go to Mr. Osmar. You had indicated earlier that the Prime Minister deserves a lot of credit for achieving a RMB hub here in Canada. Could you elaborate a bit on that?
10:05 a.m.
Managing Director, Head of Market Infrastructure, Royal Bank of Canada
I think the private and public sectors are coming together on this initiative because it does take a fair amount of work in the political dimension with China and Canada to get this over the line. I think it's an example of getting it done in the timeframes that we're dealt.
I really intended to compliment all of the participants in this because it was a very collaborative effort. Obviously he was involved as well in the actual signing ceremony, etc. So it is a great example of all of the stakeholders coming together here to make this happen.
10:05 a.m.
Conservative
Mark Adler Conservative York Centre, ON
I'm glad you mentioned that, particularly the role of the Prime Minister, the key role he played in pushing this over the goal line.
This was a very good example of both the public and private sector coming together to work collaboratively in achieving a public policy end. How would you say this is a model going forward, the public and private sectors getting together and working collaboratively in similar fashions to achieve these kinds of ends in the future?
10:05 a.m.
Managing Director, Head of Market Infrastructure, Royal Bank of Canada
I have been involved via the TFSA, the Toronto Financial Services Alliance, and participated in that forum. So you have advocacy groups and industry groups that were quite involved in getting the members themselves to dig in and make sure that they could help identify the community benefits from this or the overall benefits, and then help engage with the government parties. It is a good example to repeat in these types of—
10:05 a.m.
Conservative
Mark Adler Conservative York Centre, ON
It's not just government saying this is a good thing. It's actually the private sector saying this is a good thing, and these are the companies and organizations that are going to be hiring people, creating jobs and opportunities for Canadians.
10:05 a.m.
Managing Director, Head of Market Infrastructure, Royal Bank of Canada
My understanding is that the public sector's engagement is really dependent on the private sector identifying some merit to the initiative.
10:05 a.m.
Conservative
Mark Adler Conservative York Centre, ON
Great, thank you.
Mr. Hansen, I just want to turn to you for a second.
Our government is going to be the first to achieve balance in our budget of any G-7 country. We're the second best economy in the world in terms of doing business according to Forbes and Bloomberg magazines. For the seventh year in a row we've been rated by the World Economic Forum as the soundest financial sector. We have the strongest economic fundamentals going forward. How key were all of those factors in China's decision to agree to have a settlement centre here in Canada?
10:05 a.m.
President and Chief Executive Officer, AdvantageBC
I think the strength of the Canadian banking system would definitely be a factor. It is something that Canada is gaining a reputation for around the world, as being the only G-7 country that did not have to provide government financial support to financial institutions, which is something I think we can be proud of.
I think we have a bit of a positive reputation in that area globally, but there is a lot more we should be doing to blow our own horn, which I know is very un-Canadian. But we need to be out there marketing ourselves much more aggressively.
10:05 a.m.
Conservative
Mark Adler Conservative York Centre, ON
Well, that's a good segue into my next question. Before China liberalizes its capital markets and the controls come off its currency, we do have this window of opportunity with this settlement centre. We heard from Peter Hall who is the chief economist for EDC I guess about two weeks ago now. He said apparently only 5% of Canadian businesses know about this settlement hub.
How do we increase that level of awareness? What role does government have? What role does AdvantageBC have, and the working group perhaps, as a next step in there as this evolves?
10:05 a.m.
President and Chief Executive Officer, AdvantageBC
Well, I think that governments provincially and the federal government can help encourage the private sector to learn more about how to make these transactions happen.
Last Friday we did a workshop in British Columbia sponsored by AdvantageBC, where we only reached out to our own immediate members. We were targeting about 30 people to come together to learn how to make that transition from U.S. dollar settlement into renminbi settlement. We thought we would get about 30 people out. We actually wound up with 57. We turned eight people away. We're going to do more of these kinds of workshops going forward. There has been similar ones done by EDC and there is one coming up in Toronto—
10:05 a.m.
Conservative
Mark Adler Conservative York Centre, ON
I'm sorry, but I just want to get something else in here.
Right after the settlement centre was announced, you said on Twitter—I don't know what the proper phrase is, tweeted, twittered, whatever—that the Canadian RMB settlement hub is great news for all Canadian cities. You also said that the new Canadian RMB currency hub will benefit the oil industry.
I'm wondering, because there's been some concern recently about the lower price of oil, if you could respond to that.
