A reciprocal currency deal has been signed by Canada and China allowing for faster trade between the two countries. The deal, which was signed by Canadian Prime Minister Steven Harper and Chinese Premier Li Keqiang, will allow for easier trade between the Canadian Dollar and the Chinese Yuan (renminbi).
“It’s a great boon for the Canadian business community, both importers and exporters, because they can now do business in China with the currency and not have to go through multiple financial exchange transactions,” Stewart Beck, president and CEO of the Asia Pacific Foundation of Canada, told CBC News.
Prime Minister Stephen Harper, left, is shown the way by Chinese Premier Li Keqiang as they arrive for a welcome ceremony held at the Great Hall of the People in Beijing on Saturday. (Ng Han Guan/Associated Press)
In most cases, Canadian Business men doing business in China today have to use American currency dealing with the consequences involved – namely, higher currency exchange costs and longer waits to close deals. The deal, which allows direct exchange between the Yuan and the Dollar will allow for lower exchange costs and more efficient exchanges – allowing more profitable trade. Harper hopes that this deal will encourage more Canadian businesses to expand to China. Jason Henderson, head of global banking for HSBC Canada says tying Canada’s currency to China’s is great news as China is the second largest economy after the United States.
The author of the article consists to argue the benefits of tying the two currencies together- highlighting the fact that allowing direct exchange between the Canadian Dollar and the Chinese Yuan will allow for faster and more profitable trade. In terms of what he has to say, I must agree. The deal – a reciprocal currency deal- allows two currencies to be bound together so that one can be exchanged for the other directly. By allowing exchange to happen directly rather than through a middle man (in this case, US currency) Chinese- Canadian trade can be done in a much more convenient, efficient and profitable manner. Generally, by allowing such conditions to exist, more businesses can expand into China drawing the two countries’ economies together. Expanding on what Jason Henderson said, the deal allows Canadian currency to be connected to the second largest economy in the world. With the unemployment rates recently falling (with the creation of new jobs) this could be extremely beneficial in maintaining a low unemployment rate and could possibly present greater future possibilities for Canada’s economy.
Article: http://www.cbc.ca/news/politics/canada-china-sign-currency-deal-aimed-at-boosting-trade-1.2828707