America’s longstanding ally Canada has established the RMB Offshore Clearing Bank in Toronto, aimed at facilitating the use of the yuan on the American Continent, Ariel Noyola Rodriguez pointed out.
While the United States is pushing ahead its Asian pivot strategy, aimed at containing Beijing’s global economic “charm offensive,” America’s longstanding ally, Canada, has failed to resist the temptation of the “yuanization,” Mexican economist Ariel Noyola Rodriguez emphasized.
“While President Barack Obama fails in his attempt to tear down the triumphs of Xi Jinping’s government on a global scale, the Chinese consolidate the process of “yuan-ization” in the “back yard” of the White House, armed with Canada as a “Trojan horse,” the economist noted.
According to the economist the yuan’s strength is growing proportionally to China’s increasing importance in capital flows and global trade. The Chinese currency has already turned into both a medium of payment and a reserve currency, the expert noted.
The process of the “internationalization” of the yuan is going on steadily, due to the new clearing centers implemented in Pacific Asia and Europe. Furthermore, the Chinese currency has already grown beyond its continental limits and came to Latin America, Africa and the Middle East.
More and more countries are adopting the yuan as an investment tool and Canada, the member state of the North American Free Trade Agreement, is no exception.
“Surprisingly, the Canadian prime minister, Stephen Harper, does not only have any objections to the internationalization of the yuan, on the contrary: he does not spare any effort to turn Toronto into the main platform of the Chinese currency outside Pacific Asia,” Mr. Rodriguez stressed.
Until the end of the last year the “triumphant march” of the yuan on the American continent was limited to the conclusion of bilateral currency swap agreements between Beijing and the central banks of Brazil and Argentina.
Meanwhile, the Canadian government has taken a number of important steps facilitating the use of the yuan in North America. First and foremost, the two countries agreed to establish the first Renminbi (RMB) Offshore Clearing Bank in Toronto.
“Under the supervision of the Industrial and Commercial Bank of China (ICBC) based in Toronto, the direct cost center enables convertibility operations between the Canadian dollar and the Chinese currency without having to bear in mind the market rates of the US dollar, which permits reducing the costs of transaction and forger closer ties between the companies from both countries through the exchange of goods and services,” the economist elaborated.
The economist highlighted that according to the Canadian Chamber of Commerce estimates, Canadian companies will save up to $6.2 billion over the next decade due to the implementation of the RMB Offshore Clearing Bank, while the country’s exports are expected to reach a total of $21-32 billion.
Moreover, the Central Bank of Canada and the People’s Bank of China signed a deal “for a currency swap with agreed maturity of three years for a total of 30 billion Canadian dollars (200 billion yuan),” Mr. Rodriguez pointed out.
“By means of the swap agreement, China and Canada abandon the use of the US dollar and thereby reduce the effects of exchange rate volatility in bilateral trade flows and investment,” he stressed, adding that Beijing granted Canadian entrepreneurs with an “investment quote with a maximum of 50 billion yuan (8.2 billion US dollars)” encouraging them to participate in the Renminbi Qualified Foreign Institutional Investor program (RQFII).
The Sino-Canadian cooperation agreements have resulted in growing importance of Pacific Asia in North America. The yuan has taken the second place (10.2 percent) in the ranking of Canada’s most used currencies, while Canadian companies have tremendously increased the number of their yuan-denominated operations (by 213 percent), according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
While the “yuanization” process is spreading across North America, Barack Obama’s efforts to sustain the dollar dominance in Asia Pacific are seemingly paling into insignificance.