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Major financial centers around the world are jostling for position in the list of offshore Chinese yuan trading hubs. Hong Kong and London stand out. Luxembourg wants a piece of the action, as do Paris and Frankfurt.
Prepare to add an unlikely new name to the list: Vancouver. That’s the city that ranks 17th in the Global Financial Centres Index, in a country that snags a tiddly 1% of global foreign-exchange trading flows, according to the BIS. (New York handles almost 19% of FX flows. London proudly snags about 41%.)
So far, America’s financial capital New York has been silent on the possible development of a renminbi trading hub and the U.S. is a notable absentee in the growing list of countries that have established currency swap lines with China.
And officials in British Columbia, the Canadian province that is home to Vancouver, are keen to move fast to take advantage of this.
“For New York, this has not happened and does not seem poised to happen. This opens an opportunity for us,” Michael de Jong, finance minister British Columbia said Tuesday. Mr. de Jong wants Vancouver (along with Toronto — this is no time for city rivalry) to become a hub serving all of the American regions, as far south as Latin America. With several colleagues, he has spent the past few days meeting representatives of the City of London to find out more about what’s required to get this up and running.
The aim is to help facilitate trade and investment between Canada and China. It also reflects a desire by Canada to steer trade away from its reliance on the U.S.
British Columbia’s liquefied natural gas industry is also drawing Chinese investment interest, Mr. de Jong said. Chinese banks already have a presence in the country.
The province has already laid the groundwork here.
In November 2013, it became the first foreign government body to issue bonds in Chinese renminbi. The one-year-term bond raised 2.5 billion yuan, equivalent to just below $400 million.
The bond “was a way to send a message to Beijing that we are not only comfortable with this but enthusiastic in our desire to internationalize the Chinese currency. It opened the door,” Mr. de Jong said.
Now, he said he’s around half way through the process, which could be wrapped up within a year or 18 months. “I believe sooner than that is possible.”
One reason the process has proven relatively swift, in comparison to lengthy preparations and negotiations in other cities, is that British Columbia has been learning from London’s example and gathering practical advice from the U.K.
“[The City of London] has been the honest broker that pulled together groups that would have otherwise been in a competitive position,” said Mr. de Jong, who was sporting a warm but gappy smile after a hockey accident dislodged a front tooth. “I don’t think it is an exaggeration to say that but for [its] involvement this would not have happened.” A new line of exports for the U.K., perhaps?
Triple-A rated British Columbia expects to issue more yuan-denominated debt in future, and Mr. de Jong also used his trip to Europe to refresh relationships with investors in its bonds of all currencies. There was no clear steer on when any deals might land, however.
“In politics, comedy and bond issuance, timing is everything,” he said.