Most Popular
1. Dow Max Drawdown Bear Stock Market 2022 - Accumulating Deviations from the Highs - 21st Feb 22
2.Putin Starts WW3 in Ukraine, Will Use Tactical Nuclear Weapons, China Prepares Taiwan Blitzkrieg - 28th Feb 22
3.World War 3 Phase 1 - Putin WINS Ukraine War! - 25th Feb 22
5.Will There Be A 2024 US Presidential Election? - 3rd Mar 22
6.Gold and SIlver, Precious Metals Sector Is at a Terrific Buy Spot - 6th Feb 22
7.Why Putin Wants the WHOLE of Ukraine - World War 3 Untended Consequences - 6th Feb 22
8.Dow Stock Market Expected Max Drawdown 2022 - 19th Feb 22
9.Stock Market Calm In the Eye of the Inflation Storm - 4th Mar 22
10.M = F - Everything is Waving! Stock Market Forward Guidance - 7th Mar 22
Last 7 days
Why APPLE Could CRASH the Stock Market! - 21st May 22
Why Is Crude Oil Ignoring US Inventories? - 21st May 22
Here is Why I’m Still Bullish on Gold Mining Stocks - 21st May 22
US Real Estate Investors – Is There An End In Sight? - 20th May 22
How Technology Affected the Gaming Industry - 20th May 22
How To Set And Achieve Reasonable Goals For Your Company - 20th May 22
How Low Could the Amazon (AMZN) Stock Price Fall? - 19th May 22
Bitten by FANG? Clocked by Cryptos? -- 'Air Pockets' Everywhere - 19th May 22
Northern General Hospital Orthopedics Fractures and and Ankle Clinic Consultations Real Patient Experience - 19th May 22
Cathie Wood Goes All in on Teladoc, ARKK INSANE Noob Investing Strategy! - 17th May 22
This is Anything but Positive for US Housing Market - 17th May 22
What Should We Do If There Is No Fed Monetary Policy Pivot? - 17th May 22
All Possible Ways to Earn Free Litecoin - 17th May 22
How low Could the Amazon Stock Price Fall? - 16th May 22
Cathy Wood ARKK INSANITY There is NO Coming Back! - 16th May 22
NASDAQ 100 Stock Market LOWER LOWS & LOWER HIGH - 16th May 22
Sanctions, trade wars worsen US inflation - 16th May 22
AI Tech Stocks Earnings BloodBath Buying Opportunity - 14th May 22
Futures Contract – Trading Crude Oil With USO - 14th May 22
How to Get Kaspersky Internet Security for 80% Discount! Do not Pay Renewal Price! - 14th May 22
Sagittarius A* Super Massive Black Hole Monster at Centre of Our Galaxy REVEALED! - 14th May 22
UK Public Debt Smoking Inflation Gun - 13th May 22
What Happens When the Stock Market Dip Keeps Dipping? - 13th May 22
Biden Seeks Inflation Scapegoats; Gold Advocate Wins GOP Primary - 13th May 22
Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - 12th May 22
The War on Gold Ensures the Dollar’s Downfall - 12th May 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stay Ahead of This (Massive) Currency Shift

Currencies / Fiat Currency Feb 25, 2014 - 12:47 PM GMT

By: Money_Morning


Peter Krauth writes: China's political and economic presence surges daily. Lockstep with that surge is the growing significance of its currency.

Along with China's emergence as the world's second-largest economy, its yuan recently displaced the euro and became the second-most used currency for international trade.

Chinese leaders are intent on internationalizing their currency by growing its acceptance, perhaps even challenging the U.S. dollar as the new reserve currency, a trend I've highlighted here before.

To reach that goal, new yuan trading centers are being established.

But the location of the next major trading hub is almost certainly not where you'd expect.

And the implications will redefine the power centers of global commerce...

North America's Newest Currency

China's central bank has pledged the yuan would become "basically convertible" by 2015. So as the currency "frees up," potential settlement centers are eyeing profits from converting currencies into and out of the yuan.

In an effort to gain first-mover advantage, major cities are rushing to become the next trading hub.

Right now, no city in the Americas has yet to emerge as an important settlement center.

But two major Canadian cities are jockeying for just such a coveted position.

According to a recent article in The Globe and Mail, "Leaders in banking, government and economic development in Toronto and Vancouver are pushing to make their cities hubs for settlement of the Renminbi [or RMB, also known as the yuan] in hopes of establishing a centre for trade in the currency."

High-level talks between the financial services industry and the department of finance have been ongoing for months, but efforts have recently been stepped up.

Neil Tait, who was a banking executive in China and is currently vice-chair of the Canada China Business Council, believes there will be a huge "first mover advantage" as there is still no such center in the Americas.

Why would Toronto's Bay Street win out over say, New York's Wall Street?

A lot of reasons. Some obvious, some perhaps more subtle.

New York and Toronto may share the same time zone, but the United States is clearly a much bigger trading partner for China.

Still, Canada's relationship with China is a less complex one, in both politics and business.

Thanks to its natural resources, Canada's a coveted supplier of many of the raw materials and energy that China needs... badly.

Last year China National Offshore Oil Corp. (CNOOC) acquired Nexen Inc. of Calgary. It was the largest purchase ever in a market economy. And since then, no other country has received more Chinese investment than Canada.

By contrast, CNOOC's 2005 bid for U.S.-based UNOCAL failed, while striking a nerve over the politically sensitive energy sector. China's done oil and gas deals with the U.S. since then, but none has come close to the size of the Nexen deal. In the past six years, China spent about $30 billion on Canadian oil and natural gas assets alone.

At 900 million barrels of oil annually, Canada is by far the largest oil exporter to the United States. But success with the fracking boom has the United States becoming increasingly oil and gas self-sufficient.

Though I expect the Keystone XL pipeline will eventually be approved, it's still not a slam dunk. And energy is a big part of Canada's economy. So Canadian leaders have been giving serious consideration to other potential customers.

Prime Minister Stephen Harper has stated that it's a priority for Canada to grow its exports of energy towards Asia, all the while reducing its reliance on the United States as a market.

But it's not just about Keystone.

British Columbia's provincial government has set its sights on building a world-class LNG (liquefied natural gas) export industry. According to Premier Christy Clark, that industry would boost her province's economy and create as many as 100,000 jobs over a 30-year span.

Clearly, the stakes are high, as there's a lot to be gained.

Companies across the Americas, from Chile to Alaska, would use the new trading hub to convert their currency directly into RMB (and vice versa), saving them the additional costs of exchanging into the USD first - a necessary evil as most commodities are priced and sold in U.S. dollars... for now.

Despite the benefits, establishing a yuan trading center is a complex undertaking.

Direct government involvement will be required to help institute a direct currency swap line between the Canadian and Chinese central banks. Such lines are crucial, as they not only provide sufficient liquidity for trade, but also for emergency situations like the 2008 financial crisis.

But none of this is new to either side. Canada has currency swap lines in place with the United States, Europe, Britain, and Japan.

Hong Kong, Taipei, and Singapore already benefit from yuan swap lines. And this past June, London acquired theirs. Then in October, the European Central Bank did as well. At this juncture, setting one up in the Americas just seems like a natural progression.

Two Canadian Rivals Are Vying for the Yuan

If the next yuan trading hub lands in Canada, it's more than likely to end up in either Vancouver or Toronto... or maybe even both.

First, Toronto. It's the undisputed financial nerve center of Canada. And according to Moody's Investors Service, Canada has the safest banks in the world.

The Toronto Financial Services Alliances (a grouping of Canada's largest banks, insurers, and pension funds) have already had high-level meetings with government representatives and the Bank of Canada, hoping to gain favor for Toronto as the next yuan hub.

Canada is home to 1.5 million inhabitants of Chinese ancestry, representing 4% of the population. Of those, 40% live in Toronto. Many skilled workers, able to speak Mandarin, are a boon to the city.

By contrast, nearly 17% of Greater Vancouver's 2.5 million residents are ethnic Chinese. Vancouver's other advantages come from its location on the Pacific Coast and its proximity to Asia. What's more, it's home to large volumes of trade finance and a special program exempting foreign exchange trading from provincial taxes.

This past November, the government of British Columbia even took an innovative step, launching the first ever AAA-rated, foreign government-issued, RMB-denominated bond, worth almost $425 million.

But it's entirely possible that both Vancouver and Toronto become hubs to trade the renminbi, with even better service, thanks in part to covering two distinct time zones.

Stay Here for the Earliest Action Plan

I've already told you that China plans to one day, at least partially, back the yuan with gold. But that could still be several years in the future.

Before then, this Asian behemoth wants to boost its currency's acceptance globally by "floating the yuan," and moving it towards full convertibility.

Since most commodities are priced in U.S. dollars, those purchases require the buyer to first convert funds into greenbacks, and sellers to accept them. All this creates artificial demand for the U.S. dollar.

But this too is changing.

The Chinese already have at least 25 swap agreements in place, totaling more than $1 trillion, a fact I've highlighted here before.

As investors, it's important to spot trends before they emerge. Canada's odds of landing the next yuan trading hub are high, and it's not by accident.

Canadian energy and raw materials producers have ardent buyers for their goods in the East. The Chinese are chief among them. The world will continue to renew and build out its infrastructure and continuously modernize. That's not about to change.

Having a settlement hub in Canada will facilitate trade and lower costs for buyers and sellers. And providing the necessary raw materials will benefit resource companies and their shareholders.

Today I wanted to let you in on this emerging story: The Yuan is coming to Canada.

Although it's too early in the race to call the winning city, you're already ahead of the game on this global shift.

And rest assured, Money Morning readers will be the first to know how to adjust their portfolios and harvest the profits when it happens.

Source :

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in