Thank you, Mr. Chair and honourable members of the committee.
I'm pleased to be here to participate in this committee's study on the Canadian RMB trading centre.
I'm also honoured to be joined here today by my colleagues from the Department of Finance, Export Development Canada, the Bank of Canada and the Industrial and Commercial Bank of China.
In my role as head of foreign exchange products at BMO Capital Markets and as co-chair of the Toronto Financial Services Alliance working group on the RMB hub, I had the opportunity to work with many stakeholders in both public and private sectors in support of efforts to make the dream of an RMB hub in Canada a reality.
Our efforts were predicated on the idea that Canada can benefit significantly from trade diversification, especially to major growing economies such as China's. Such increased trade creates jobs at home and strengthens Canada's economy.
Historically, Canadian companies have tried to do business in China while having to use U.S. dollars to pay their Chinese suppliers, that being a currency many Chinese suppliers will accept. This arrangement adds foreign exchange transactions to the purchases and the process, which forces the retailer to add a 5% to 8% buffer to all similar transactions.
Taken together over the course of a year, this process adds billions of dollars to the prices of imported goods, a real and significant cost to Canadians. It is little wonder that Canada's trade with China, while significant, still appears to have significant room to grow. The establishment of a trading hub allows Canadian financial institutions to purchase renminbi on the open market on behalf of their clients. In the case of a Canadian retailer, such a company will be able to acquire renminbi at a market price, hold the currency in an account here in Canada, and then cut a cheque in renminbi when they need to pay their suppliers. Added cost from multiple foreign exchange transactions will disappear. Several RMB hubs have already been established elsewhere in the world, such as those in the U.K. and in Singapore. If patterns seen elsewhere are replicated here, we can expect to see a significant increase in total trade between Canada and China once the hub is up and running.
This committee will already know that the Canadian banking system has been rated the soundest in the world for the past seven years by the World Economic Forum. The renminbi hub will provide a further benefit to the financial sector as well. It will increase the sector's diversity and make Canada an even more appealing place in which to invest and do business.
The announcement in November of the agreement to establish the RMB hub here in Canada was fantastic news for Canadian companies. The Prime Minister and officials at the municipal and provincial levels across the country are to be commended for both their vision and their efforts. On behalf of BMO, I would like to thank them for getting this initiative to the goal line.
At BMO our capabilities in China are unmatched by our peers. In fact, we have been building relationships in China almost as long as the bank has been in business. We undertook our first foreign exchange transaction back in 1818. In 1961, with Canada's first major wheat sales to China, BMO became one of the first western banks to have direct ties with the Bank of China. Today, we are the only Canadian bank and one of only three North American banks to have a wholly-owned Chinese subsidiary.
The renminbi hub is yet another milestone for our enduring relationship with China. We look forward to using our strong foreign exchange capabilities to support our customers as they expand their businesses into China. We also look forward to working with all the stakeholders to make the hub the success we know it can be.
Mr. Chair, thank you for the opportunity to address the committee today. I look forward to answering any questions.