The Future of the Renminbi and Next Steps for Canada


Pacific Prospective features the research of graduate students.

Memo #328

By Grégoire-François Legault – gregoire.legault [at]

Legault_Gregoire_photoThough internationalization of the renminbi (RMB, the “redback”) is far from complete, it is well under way. In 2014, China signed eight new agreements to establish RMB hubs around the globe, and the redback was used to settle almost 25% of payments across China’s borders. The RMB is already the fifth most used currency for international payments – in December 2014, 2.17% of global payments were conducted using the redback, thereby displacing the Canadian and Australian dollar. By the end of 2015, the RMB is projected to overtake the Japanese yen as the fourth most used currency. Canada now needs to consolidate its position as a renminbi hub, as well as to consider launching free trade agreement negotiations with China.

Last November, the Bank of Canada (BoC) and the People’s Bank of China (PBoC) signed a bilateral swap agreement (200 billion RMB/30 billion CAD), as well as a memorandum of understanding laying the foundations for the establishment of a renminbi hub in Canada. On November 9, the Industrial Commercial Bank of China (ICBC) was designated by PBoC as the clearing bank responsible to settle transactions, a move that will enable round-the-clock renminbi trading around the world. The Canadian hub, which could be operational in 6 months to 2 years, is expected to dramatically boost trade between the two countries and to benefit the Canadian financial sector. Indeed, current estimates indicate that the direct benefits of a hub would be anywhere between 21 to 32 billion dollars over the next 10 years in increased exports, in addition to potential discounts on imports of 2.8 billion dollars and 6.2 billion in reduced transaction costs.

Establishing a renminbi hub in Canada was the easy task, so what comes next? First, stakeholder groups will need to help Canadian and Chinese businesses tap into the benefits of a renminbi hub by promoting the use of the renminbi. Second, now armed with both a bilateral investment treaty (BIT) and a renminbi hub, the next logical step for Ottawa is to start negotiating a free-trade agreement (FTA) with Beijing as soon as possible. Some of Canada’s trade competitors in Asia, namely Australia and New Zealand, all have FTAs with China. The absence of an FTA reduces the benefits of a currency hub and puts Canadian exporters at a serious disadvantage. Even though Canada and China have agreed to establish a panel to examine ways of deepening bilateral cooperation in areas such as trade and economic relations, this non-committal approach falls short of a true strategic economic partnership sealed with a trade agreement. Unfortunately, with federal elections looming, the Canada-China bilateral relation will continue to lack a clear direction until the electoral dust settles.

Grégoire Legault is a Master in Asia Pacific Policy Studies candidate at the University of British Columbia and a Fellow at the Institute of Asian Research. He has also contributed Memo #244, Memo #257, Memo #267, Memo #289 and Memo #306. You can follow him on Twitter, connect with him on Linkedin or visit his photo blog.

If you enjoyed this memo, subscribe to our e-newsletter for free and receive new memos weekly via email.


Not just in China anymore. The internationalization of the Bank of China and the RMB presents challenges and opportunities for Canada (credit: JHH755).

Not just in China anymore. The internationalization of the Bank of China and the RMB presents challenges and opportunities for Canada (credit: JHH755).




Related Memos:

See our other memos on China.

Print Friendly

Mongolia – From Sino-Russian Buffer to Conversion Zone

Memo #318

By Mendee Jargalsaikhan – mendee [at]

J_MendeeLast autumn, Presidents Xi Jinping and Vladimir Putin made separate visits to Mongolia, met for a tri-lateral (Russia-China-Mongolia) summit in the Tajikistan capital of Dushanbe during the leadership summit of the Shanghai Cooperation Organization (SCO), and dispatched their vice-foreign ministers for a working-level meeting in preparation for next year’s summit in Ufa, Russia… Continue reading

‘One Drug with Multiple Names': Broad Powers and Product Differentiation in the Chinese Pharmaceutical Industry

Memo #315

By Yifan Wang – yfwang [at]

Wang_photoDrug regulations in China stipulate that chemical and generic names of drugs are determined by the Chinese Pharmacopeia (Ch.P) and the State Food and Drug Administration (SFDA), while brand names are chosen by pharmaceutical companies, as long as they are recorded with the SFDA. Some Chinese pharmaceutical companies take advantage… Continue reading

Canada – China FIPA: Just the Facts, Please

Memo #313

By Matthew Levine – matthew.a.j.levine [at]

Levine_photoCanada’s Foreign Investment Promotion and Protection Agreement with China (China FIPA), which entered into force October 1, 2014, is a laudable step towards norms-based economic relations in the Asia-Pacific. My two goals here are to briefly introduce key developments in the China FIPA and to put in context the surprisingly… Continue reading

After the Massacre of 2011: Challenges to Peace and Security along the Mekong River

Memo #312

By Kai Chen – chenkai [at]

Kai CHENIn the so-called “Mekong River massacre” of October 2011, 13 Chinese merchant sailors working on the Mekong were seized and murdered by members of the Hawngleuk Militia led by its Burmese leader Naw Kham. Later captured in Laos and extradited to China, Naw Kham was found guilty of the… Continue reading

The Lost Generation: “Barefoot Doctors” in Post-Reform China

Memo #309

By Jiong Tu – jt457 [at]

Jiong Tu_photoChina’s barefoot doctor system is known for having provided inexpensive and accessible medical care to its large rural population in the 1970s. But the system became bankrupt with the advent of market reforms in the 1980s and many barefoot doctors either became private doctors or gave up medical practice… Continue reading

Big Noise, Big Settlement: the Logic of Claims-making in China

Memo #308

By Sophia Woodman – Sophia.Woodman [at]


The twenty-fifth anniversary of China’s nationwide democracy movement and its suppression in June 1989 was marked in the mainland by an imposed silence. Revisiting the “verdict” that the demonstrations were a “counterrevolutionary rebellion” does not appear to be on the horizon.

But this does not mean… Continue reading

Are Chinese Citizens becoming more Assertive? Perspectives from the (Limited) Data

Memo #307

By Sophia Woodman – Sophia.Woodman [at]

Woodman_photoThe last decade has seen an explosion of academic and media reporting about protests in China. Chinese citizens’ access to social media makes it harder for the authorities to suppress information about unrest. Even when mainstream media reporting is censored, often the news of an event has already made… Continue reading

Charging Beijing’s Electric Vehicles Policy

Pacific Prospective features the research of graduate students

Memo #306

By Marc McCrum – mbmccrum [at] and Grégoire-François Legault – gregoire.legault [at]

According to the World Bank, Beijing’s poor air quality costs $300bn a year in healthcare costs and premature deaths. Of Beijing’s air pollution, over 30% is estimated to be the direct result of vehicle exhaust… Continue reading

Suicide Protesters in Eastern Tibet: The Shifting Story of a People’s Tragedy

Memo #302

By Antonio Terrone – a-terrone [at]

Terrone_photoThe recent wave of self-immolations across the Eastern Tibetan regions of the People’s Republic of China continues to leave the world in dismay for both its violence and determination. They also represent a new shift in terms of the demography of protesters in Tibetan society. Among the 131 immolators… Continue reading