Finance Committee on Feb. 17th, 2015

[Peter Hall]

I mean no disrespect, but a very close Chinese friend of mine once replied to a question of mine by saying that the Chinese eat everything.

[Scott Brison, Liberal, Kings—Hants, NS]

Very good.

B.C. in 2013 became the first foreign government to issue bonds into the Chinese renminbi market. What are the opportunities in the future for other provincial governments?

[C.J. Gavsie]

What B.C. did was raise a dim sum bond denominated in CNH to be able to give investors the ability to get some renminbi exposure while holding on to a very high level of debt for a short period of time. They've subsequently come back to do a second offering. EDC has also stepped into that market a couple of times, I believe.

I think that's going to create tremendous opportunity. As other colleagues have informed me, the amount of dim sum issuances last year was greater than those of the U.S. dollar or those denominated in U.S. dollars, so there is appetite by investors out there on a global scale. I think there is just as much Canadian debt held by foreigners. We certainly have a terrific opportunity to be able to raise more of those types of bonds.

When Canadians run their businesses and take in CNH or renminbi in the form of debt, they have to ask themselves if they're doing that from a symbolic perspective, which I believe a couple of these issuances were, to demonstrate to their investors that they could issue there. But as we see more businesses having a funding need for RMB, I think that will facilitate much further investment.

[Scott Brison, Liberal, Kings—Hants, NS]

You don't know of other provinces that are considering—

[C.J. Gavsie]

I know that several provinces and several Canadian corporations have examined it, but they're looking to make sure that it makes sense for them, particularly when you translate CNH into Canadian dollars.

[Scott Brison, Liberal, Kings—Hants, NS]

You said earlier that Canadian pension funds are seeking investment in China. Do you have any thoughts on what asset classes they would be interested in investing in? Is it going to be infrastructure?

[C.J. Gavsie]

I believe it would be infrastructure. It would primarily be short-term debt because most of these pension funds, through their investment committees, have a very strict adherence to what they can invest in. It would likely have to be government-backed debt at the beginning. Certainly I would see corporate debt and common equity coming as a second or third level of investment.

[The Chair, Conservative, James Rajotte]

You have one minute.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Zhu, the CIC, China Investment Corporation, has scaled back activities in Canada, and in Toronto specifically, to increase its presence in New York.

What do you think that means, and is there a broader message in terms of Chinese investment in Canada in the current context?

[MingXuan (William) Zhu]

They are thinking about that.

I think maybe it relates to the return of that investment in Canada. In terms of their portfolio, it may be that New York is another good opportunity for them to explore. It's still under consideration about whether to relocate it or not, but I think they will probably keep investing in the Canadian market as well, no matter where the head office is in North America.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Brison.

We'll go to Mr. Adler, please.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Chair.

Mr. Gavsie, I want to applaud you first of all, and thank you for all the hard work you put into creating this hub. I know you were instrumental in the creation of it.

On November 8, your bank issued a press release in response to the creation of the hub, where you're quoted as saying the following:

We thank the Prime Minister and his officials for getting this to the goal line. Canada's banking system has already been rated the soundest in the world for the past seven years by the World Economic Forum, and Bloomberg has ranked Canada in second place in its list of the most attractive destinations for business. Becoming an RMB hub will increase the diversity of our financial sector, and make Canada an even more appealing place in which to invest and do business.

I just wanted to read that into the record.

Mr. Hall, you indicated earlier in your remarks that roughly 5% of Canadian business is currently aware of the creation of the hub. We have the institutional regime that has been set up. We have the hub. Government played a key role in that, along with Mr. Gavsie and the BMO.

Whose responsibility is it now to increase that 5% to 40%, 50%, or 60%? Is that government's role, or is that the private sector's role? If it's the latter, the private sector's role, can you lay out a game plan for that?

[Peter Hall]

I'm not sure that it's my role to lay out the game plan for that, so I'm not sure that I can speak for EDC on that score.

I will say that in repeated survey work that we do with the market, one of the key barriers that Canadian exporters face in terms of being able to take advantage of an opportunity overseas is awareness. It's the awareness of all the tools that are available to them to operate inside of a particular market, and the risks that they face in particular markets. Being cognizant of that, we take it upon ourselves to be information providers to the Canadian exporter base. We very freely advertise that we are about the business of identifying the opportunity, and as much as we possibly can, holding the hand of exporters through a particular process. I cannot see us not being involved in getting the news out about the development of a hub.

[Mark Adler, Conservative, York Centre, ON]

EDC does a very good role of what you're talking about. I acknowledge that, and and I want to thank EDC for that.

Mr. Gavsie, it's back in your court. What now?

[C.J. Gavsie]

It's ongoing with the public and the private sectors. We have discussed this with the working group with federal finance and several provinces at their finance levels. We're definitely going to have to work in conjunction. Mr. Hall mentioned awareness, so we are working collectively through the TFSA and AdvantageBC to deliver educational programs on how the hub will work, what type of product is good for particular types of businesses, industry trends. We're trying to bring all of that to market as an industry group, not just one single bank, and the industry group is a collection of the public and the private sectors.

One piece of information was that we held a conference last week in Montreal for Bank of Montreal corporate and commercial clients. I've never seen the level of education so high as far as those companies coming in and asking questions is concerned. It's telling me that education, that concern over this is a confusing story, so we need to make it simpler, is seeping its way through into corporate commercial Canada regardless of the size of the company. All businesses, from so many different sectors, seem to be asking themselves what's in it for them—everybody can see what's in it for Canada—but what's in it for them and how do they tap into it.

[Mark Adler, Conservative, York Centre, ON]

Okay, thank you.

I think I'm okay, Mr. Chair. My question has been answered.

[The Chair, Conservative, James Rajotte]

I appreciate that because I did have one final question.

Mr. Hall, you talked about your two RMB bonds and you said you could talk to the committee. I don't have much time, but can you highlight some of the details for our information?

[Peter Hall]

We undertook these bonds. The first was issued in July 2013. It had a face value of renminbi 101 million or $16 million U.S., 12 months at 2.1%. The second was issued in November 2014 with a value of renminbi 306 million or $50 million, 18 months at 2.5%. It was referred to in the comments of others that some of the issues that have been done were symbolic and this was the case for us in the actual implementation of these bonds in actual transactions. That pipeline was not, as I understand it, available at that time, but we wanted to indicate our participation in this marketplace and so it was a marker for us to say that we can do this, that we are willing to do this and that we are certainly willing to do it again.

[The Chair, Conservative, James Rajotte]

Okay, thank you. I appreciate that.

I want to thank all our witnesses for a very interesting session this morning. Thank you so much for your comments, and for responding to our questions. If you have anything further to submit, please do so through the clerk. We'll ensure all members get it.

Thank you, colleagues.

The meeting is adjourned.