0

Reading this new release

is all the hype because these folks will give a better exchange rate between CAD and yuan than the kiosks at the airport?

2

Chinese suppliers can quote their price in CNY rather than USD (as has been typical), and thus avoid the exchange risk from US dollar volatility- the CNY has been generally appreciating so committing to receive payments in US dollars when their costs are in CNY means they are typically on the losing end of the equation and they have to pad their prices a bit.

Canadian importers will have to buy RMB (typically with CAD) to pay for their orders and Canadian exporters can take payment in RMB if they wish, or set prices in CAD. By avoiding the US dollar middleman the transactions are made less risky and incur less costs. Japan did this many decades ago (they, too, used to price their products in USD).

This is important in transactions of large amounts, not so much for the tiny amounts associated with tourism. Two-way annual trade between China and Canada is in excess of $70bn.

Of course Forex trading may greatly exceed the actual amounts required for trade- the world Forex market is at least an order of magnitude greater than size of real international trade. All that trading in currency and financial instruments means more jobs on Bay Street and more money flowing into a very vital part of the Canadian economy.

Recent article from the (liberal) Toronto Star here.

  • Export Development Canada (trade finance bank) has just (March 24) signed a deal for trade settlement in CNY renminbi, expected to boost export trade. – Spehro Pefhany Mar 24 '15 at 16:17

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.