On Saturday China and Canada agreed to expand the use of the Chinese currency in trade and investment. Their centrals banks have agreed to establish a currency swap line worth the equivalent of 32$ billion dollars to be used within the next three years. Under this agreement the People’s Bank of China designated the Industrial and Commercial Bank of China as the bank in Canada that is able to clear transactions in Yuan. This would be the first financial institution in North America to have that privilege. This agreement is a big step toward increasing the usage of Chinese currency internationally.
China has also granted Canadian financial institutions up to 50 billion Yuan to invest in China’s capital markets. The swap will allow both central banks to lend each other up to 200 billion Yuan and about 30 billion Canadian dollars. China is looking to promote the use of its currency in order for it to become a reserve currency like the United States dollar and the Euro. The PBOC, People’s Bank of China, has signed swap agreements with a number of countries. This week they signed a similar deal with Qatar for 35 billion Yuan, to boost financial dealings with the gas-rich gulf state.
Canadian officials are excited to enter this agreement. Through it Canada can decrease its trade deficit with China and repair its business relationship. The agreement also supports economic growth and job creation.