Canada to launch yuan clearing hub: report

Move set to boost currency's internationalization

China will reportedly sign a deal with Canada to launch a yuan clearing hub in the country, the first one in North America, during Canadian Prime Minister Stephen Harper's visit to China.

The yuan clearing center will be located in Toronto rather than Canadian capital Vancouver, Reuters reported Tuesday, citing sources speaking on condition of anonymity, and an announcement is expected during Harper's trip to China, which started Wednesday and runs until Monday.

A press officer with China's central bank who did not give his name told the Global Times Wednesday that so far there is nothing to announce on the issue. The Canadian Embassy in Beijing was also unavailable for comment by press time.

Canada had earlier expressed an interest in establishing a yuan clearing hub. In June, Canadian Finance Minister Joe Oliver said his country was holding "very preliminary" discussions with the Chinese government on the issue, according to Bloomberg.

The deal, if announced, will be the first of its kind in North America. Yuan clearing centers have already been set up in European and Asian financial hubs including London, Frankfurt and Singapore. Sydney is also expected to join the list later this month.

"It's no surprise that Canada is catching up with other major economies by strengthening economic relations with China, as the deal will help the country boost its trade and investment ties with China," Zhao Xijun, deputy director of the Finance and Securities Institute at Renmin University of China, told the Global Times Wednesday.

China is Canada's second-largest trade partner after the US. In 2013, the two countries' bilateral trade volume amounted to C$73.23 billion ($64 billion), accounting for 7.74 percent of Canada's total foreign trade volume, according to data from Canada's industry authority.

Launching overseas yuan clearing hubs will facilitate the use of the yuan abroad, and is an important step toward the Chinese currency's internationalization, experts said.

China has stepped up its signing of currency swap agreements, launching direct-trading between the yuan and other currencies, as well as appointing offshore yuan clearing banks in the past few years.

The People's Bank of China (PBC) announced Tuesday that it had appointed Industrial and Commercial Bank of China to be the yuan clearing bank in Qatar, the first clearing hub in the Middle East, a move that analysts said could help the region's oil exporters reduce their dependence on the US dollar.

"It's the right time for China to expand the use of the yuan abroad, as there is growing demand for the currency in the overseas market," Li -Jianjun, an analyst with Bank of China (BOC), told the Global Times Wednesday.

Economic fluctuations in the US and European Union and their long-term quantitative easing policies have weakened international investors' confidence in their currencies, Li noted.

The US Federal Reserve ended its six-year bond buying program at the end of October.

"Overseas financial institutions also hope to earn a share of the booming yuan business," he said.

The yuan has become the world's seventh most-used currency for international payment and settlement, Yue Yi, vice president of BOC, told a media briefing on the yuan's internationalization held in Beijing on Tuesday.

According to Yue, cross-border trade settlements in yuan have surpassed 16 trillion yuan since China kicked off a trial program in July 2009, and the amount of overseas yuan deposits has reached 2.6 trillion yuan.