Finance Committee on Feb. 24th, 2015

[Janet Ecker]

Where there are investors in infrastructure projects in Canada, I think we should be encouraging that across the board. As you know, whether it's municipal, provincial, or federal, we have great infrastructure needs across the country.

Our infrastructure investors are domestic infrastructure investors, if you will, and our governments don't have enough resource to do it all on their own. If there is a way to welcome Chinese investment in such projects, I think we should do that. Again, we need good clear rules so that everyone knows how the game should be played, but I think that investment is very helpful.

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

In terms of an overall China strategy—and I've spoken to John Manley about this, and he has great experience in the area—Chancellor Merkel has been to China four times in the last year to meet with the new leadership. In the past, we've also had Team Canada missions which were very active, in fact taking 350 CEOs at a time to China.

Should we be doing more of that high-level trade promotion in China, and should we participate to a greater extent in fora like the “Summer Davos”, for instance? Should government play a larger role?

[The Chair, Conservative, James Rajotte]

Give just a brief response, please.

[Brian Kingston]

I'll answer very quickly. First, the global markets action plan was a good step forward in trying to make a strategy for Canada on launching trade missions and engaging with important partners, but as I've said, a strategic partnership would be a great next step. Australia, for example, has one, and it has an annual PM-level meeting plus two cabinet-level meetings every single year. If we had that sort of formal mechanism in place, that would be really helpful for the overall relationship.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Brison.

Ms. Bateman, please.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Thank you very much, Mr. Chair.

Thank you to all our witnesses this morning.

I'm going to start with Mr. Kingston. We've had a number of witnesses who have indicated the positive nature of this opportunity. We had one witness who perhaps led us to believe that only government can do something to frame this properly. I just want to find out, Mr. Kingston, what are you doing for your organization? You are one of the leaders at the Canadian Council of Chief Executives. How are you preparing your membership to embrace this opportunity?

[Brian Kingston]

I'll start by saying that because we represent large corporations, many of them are already in China and they have very complex operations, so they don't necessarily need our advice on how to operate in China. When we saw this initiative coming along, we raised it with the government and indicated our support. We thought this was really important, and that was communicated to our members as well, just to make sure that if they weren't aware for whatever reason, they now are aware of the opportunities this creates.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Do you have some SMEs also in your membership, or do you not?

[Brian Kingston]

No, we don't. We represent large companies. Many of them have supply chains that will have many SMEs as a part of that, but we only represent large—

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Do they want you to support those supply chains? Because if there is a weak link in any chain—

[Brian Kingston]

We don't deal directly with their supply chain companies. We do research on the size of their supply chains and how that fits into the overall Canadian economy.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Fair enough.

I would like to put the same question to Mr. Lemieux.

I completely agree with my colleague Mr. Saxton that your presentation was very well balanced. However, I'm curious and I would like to know whether you have a pedagogical approach to the implementation of the Canadian Renminbi Trading Centre.

[Eric Lemieux]

We work on several levels.

First, we talk to Montreal and Quebec companies about the benefits of trading in RMB.

Second, we work with financial institutions to ensure that they can use the opportunity to provide RMB-denominated products. They are currently looking into that with colleagues from Toronto, among others, and giving thought to various types of products and ways to make them available.

Third, as I already mentioned, we are trying to determine whether developing derivatives could be more of a long-term opportunity.

Finally, we work with portfolio managers to see whether they could potentially provide RMB-denominated products to Chinese clients, be they institutions or individuals. A number of portfolio managers in Montreal are already managing money for a Chinese pension fund. In that context, we are looking into potentially complementing the product range.

We work with companies, financial institutions and portfolio managers. We will eventually also be working with types of derivatives.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

So there are financial and cultural links with Canada and Quebec.

[Eric Lemieux]

Yes, indeed. We have concluded an agreement with the Shanghai Financial Association. As I said earlier, Shanghai and Montreal have been sister cities for 35 years. The Shanghai group of financial institutions is equivalent to TFSA or Finance Montréal.

We are trying to figure out how we can benefit by using the RMB. Shanghai will play a very important role in the Chinese plan. The free trade pilot area where their people take advantage of the RMB's mobility is somewhat similar to Hong Kong's current system. That's something to keep an eye on. We absolutely want to put ourselves in a position to reap any potential benefits.

Canada is doubly interested because it is becoming a hub for RMB trades. I think it's very worthwhile for us to monitor what will happen in the Shanghai pilot area.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Okay. Thank you, Mr. Lemieux.

Ms. Ecker, I'm very curious as to how you're embracing this opportunity for your membership. It's the same question for you if we may.

[Janet Ecker]

First of all, regarding one of your comments that you made earlier, it needs to be—and it has been very much—both a government and an industry partnership to get this going and make it work. It does require both sides of the equation, if you will.

We have been working with the Canadian Chamber of Commerce, for example, and the Canada China Business Council to reach out to business. Obviously, there's a learning curve for a company if they wish to take advantage of this opportunity.

There are things like AdvantageBC, for example, that has been running workshops for company treasury functions. There are people who do the financing for the companies to say here's how you go about doing it.

We've been working with some of our financial institutions that are doing sessions with their clients to say here's what it's all about, here's how you do it. There will be a number of other initiatives, meetings, workshops, etc., over the course of the year that are designed to basically promote how to use this, how to take advantage of this, and how to move forward.

As Mr. Lemieux mentioned, one of the exciting things about this is the collaboration between AdvantageBC, TFSA, and Mr. Lemieux's group. We are looking at how we can collaborate on this to make sure that Canadian business has an opportunity, whether it's financial companies or other businesses, to grow with this.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Dionne Labelle, go ahead.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

Thank you, Mr. Chair.

Good morning, ladies and gentlemen.

My first question is for Mr. Lemieux, who works in the Quebec financial sector.

You said that 100,000 people work for financial institutions or in financial services in the Montreal region. Do you think that setting up the hub will affect employment in the financial sector or will it not have a significant impact?

[Eric Lemieux]

I hope this development will help increase the number of jobs, but I think we have to be realistic and say that, ultimately, this will more likely enable companies to provide more business opportunities and increase their volume. But I don't think the number of jobs will double as a result.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

I would like to talk about the opportunity to create derivatives. When I hear the term “derivatives”, I understand it as “commercial paper”. I remember that the Caisse de dépôt et placement du Québec lost $40 billion with commercial paper. Are any derivatives from mainland China currently being traded on markets outside Canada or even in Canada? I'm thinking of Hong Kong or Singapore. Do you know what those products are?

[Eric Lemieux]

If a derivative was created, it would be a derivative for Canada or to help Canadians who are trading in RMB. In that context, certain things must be known.

A derivative or an option is also a means of protection. It's a way to manage risk. Bad things do happen when derivatives are used inappropriately, but a derivative or an option is ultimately a protection tool. People use it to protect themselves from a rate or from something else. The derivatives I am talking about could be useful to this new market that is opening up between Canada and China. So those would be Canadian derivatives in Chinese currency.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

What is available elsewhere?

[Eric Lemieux]

To my knowledge, mainland China still doesn't use derivatives. As for Hong Kong, it is similar to what we have in terms of products.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

Do you know what the current ratings of those derivatives are?