Evidence of meeting #68 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.
9:10 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Thank you, Chair.
And thank you to our witnesses, for being here today.
My first question is for Brian Kingston.
Mr. Kingston, how will the establishment of an RMB trading hub in Canada facilitate the expansion of trade with China?
9:10 a.m.
Senior Associate, Canadian Council of Chief Executives
China, as I noted, is our second largest trading partner, but I highlighted a few sectors where Canada could be doing more. Other countries are trading much more with China than we are. This hub gives us an advantage, because we can now compete with competitor countries in China, and with lower transaction costs we may actually be able to beat out competitor companies to win more deals and therefore increase trade. So that would be the main way.
9:10 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Okay, thank you.
Do you know how much two-way trade has expanded with those locations that already have an RMB trading hub, like Singapore and Hong Kong, etc.?
9:10 a.m.
Senior Associate, Canadian Council of Chief Executives
Yes, I do. An example is Australia. I can't give you the trade figure. I can give you the RMB transaction increase; since their hub, it's increased by 248%. I don't know how that's translated into actual trade flows, but it's a significant increase in the currency trade.
9:10 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
When did they get they get their trading hub, do you know?
9:10 a.m.
Senior Associate, Canadian Council of Chief Executives
I'll have to double-check on that. I'm not sure.
9:10 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
That's two and a half times or basically a 250% expansion as a result. So we can hopefully expect something similar to happen here as well.
My next question is for Janet Ecker.
Mrs. Ecker, how does the establishment of an RMB trading hub in Canada benefit Canada's financial sector?
9:10 a.m.
President and Chief Executive Officer, Toronto Financial Services Alliance
Well, it allows them to do better deals with their clients, Canadian companies, for example, with Chinese businesses. It allows them to start offering more services and products, ultimately perhaps even for the retail market—RMB-denominated financial products, for example. It basically allows them to do more business and better support their clients in internationally reaching out and doing business with China.
I would like to just make one other point about the SME issue. If you couple this currency ability now available with the agreement with things like the Alibaba company with its focus on bringing the Chinese market to SME countries around the world—for example, they have 100 million consumers a day on their purchasing platform—and if you are able to link that up with a medium-sized Canadian firm, the opportunities open up for that SME without having to have the kind of infrastructure that a normal multinational conglomerate might need. It's quite exciting if we can actually take advantage of those sorts of opportunities. And this is the foundation that allows that to happen.
9:15 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Thank you.
Do you know what Canadian financial institutions are doing to ready themselves for this particular change? Have they hired new people? Have they set up a new office? What sorts of preparations are Canadian financial institutions making?
9:15 a.m.
President and Chief Executive Officer, Toronto Financial Services Alliance
They are looking at the kinds of businesses they want to support. As you know, some of them have more global operations than others do. They're looking at what kinds of services and products they want to provide. They're looking at the kinds of teams they'll need to do this. That work is going on.
The other thing is that they are working with their clients, and we're all encouraging opportunities for businesses to take a look at the potential here, whatever kind of company they are.
Right now I would describe it very much as doing assessment, educating clients on how to deal with it, and building the capacity to take off with these services. It will take a while to build. The first major step—and I suspect ICBC mentioned this earlier—is that they'll be launching their clearing bank facility on March 23. That will be a major milestone for us. I think you'll see, as has happened in other jurisdictions when they got the hub designation, a fairly quick uptake of RMB business.
9:15 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Will this give Canadian businesses an advantage over U.S. businesses?
9:15 a.m.
President and Chief Executive Officer, Toronto Financial Services Alliance
I think it could, because it just makes it easier to deal with Chinese business. You're taking away some of the currency risk. You're taking away some of the time. You're taking away some of the complexity. Obviously a company will have to take steps to do this the first time, but once it gets into the role of doing this, it will save time, money, complication, and currency risks.
It will give us a bit of an edge, and as I think Mr. Kingston mentioned, for some industries with very tight margins, any percent they can shave off a cost or any risk they can minimize gives Canadian business an advantage.
9:15 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Thank you very much.
Finally, Mr. Lemieux, can you explain how Montreal is going to promote itself as a centre for derivative trading in RMB?
9:15 a.m.
Director General, Finance Montréal
The city of Montreal already has an exchange that includes derivatives. We intend to examine how certain derivative products could incorporate the renminbi. We have a number of teams who are going to look at how those products could be created. We also plan to support any initiative out of Toronto or Vancouver involving the use of renminbi derivatives. As you know, the exchanges have been designated, and Montreal's is going to specialize in derivative products.
9:15 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Thank you very much, Mr. Lemieux.
I also want to compliment you on your presentation. I thought it was extremely well balanced, and I appreciate that.
9:15 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thanks to each of you for joining us today.
I'll start off with Janet Ecker.
Hello, Janet. It's good to see you again. The Toronto financial services industry is doing a good job of promoting not only Toronto but Canada.
We're told the Canadian pension funds will be able to and will increase their levels of investment in China as a result of having the renminbi hub in Canada. What do you think the impact will be on Chinese investment in Canada?
9:15 a.m.
President and Chief Executive Officer, Toronto Financial Services Alliance
I think it's going to be a little easier for them to do business deals with Canadian business. As you know, China is very interested in various industries here in Canada. They're interested in our agricultural products because, of course, of their growing consumer markets. They're interested in our technology in a number of areas: food safety, pollution control, etc., so there are a lot of areas in which I think the Chinese are interested in partnering with Canada, investing in Canadian business, and selling Canadian products. The renminbi deal will make it a little bit easier for all of that to happen.
9:15 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
I have a Wall Street Journal article in front of me that speaks of the China Investment Corporation, CIC.
CIC has a fund of almost $900 billion Canadian. In 2009, I met Gao Xiqing, who was their chief investment officer at that time, and he told me they chose Toronto over New York because Canada was more open to Chinese investment than the Americans.
The Wall Street Journal article is headlined “CIC May Move North American Headquarters to New York from Toronto”. The article refers to concerns that the Canadian government “might be rolling up the welcome mat it once laid out for Asian” investment. It referred specifically to tighter rules around state-owned enterprise investment and ambiguity for Chinese investment in Canada post CNOOC-Nexen.
Mr. Kingston, you referred to some areas where the government could do a better job of potentially promoting Canadian investment opportunities in China. Would making our rules around foreign investment clearer and less ambiguous be one of the areas we should tackle?
9:20 a.m.
Senior Associate, Canadian Council of Chief Executives
I'll start by saying that FIPA was a very good and very welcomed agreement to help clarify investment and the rules around investment. That makes Canada stand out for Chinese investors as safe and reliable.
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
But do you not acknowledge that post CNOOC-Nexen, the environment for Chinese investment in Canada has changed?
9:20 a.m.
Senior Associate, Canadian Council of Chief Executives
We have commented on that previously, and we have raised some concerns with the way that was communicated. It did create uncertainty for Chinese investors; hence the reason we've recommended that Canada take a couple of extra steps—as I said, a strategic partnership and an FTA—to ensure that we build this relationship.
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Ms. Ecker, would you also agree that we ought to clarify our foreign investment policy for Chinese investment?
9:20 a.m.
President and Chief Executive Officer, Toronto Financial Services Alliance
I certainly think that clarity and transparency are very, very helpful.
As you know, it's a complex area. We do have national interests, which I think, quite rightly, that any government would look to protect. However, doing it within a framework of a Canada-China strategic partnership or furthering free trade agreements I think is probably the right way to go. We can set some rules so that everyone knows how we would approach this.
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Given that 80% of mining financing in the world over the last 10 years was transacted in Toronto—Toronto is a hub for natural resource financing globally—and also recognizing the need for significant investment in building infrastructure around projects like Ring of Fire, or Plan Nord in Quebec, should this be an area of focus for Chinese investment in Canada, helping to build the infrastructure we need for the future as commodity markets improve and we develop those natural resource opportunities?
