The RMB is already the fifth most used currency internationally, and two recent developments show that China is definitely winning the currency wars: Canada launched a RMB trading hub and the first offshore funding of a Chinese company has been arranged by HSBC.

Canada’s RMB hub

On Monday, Canada launched a Renminbi Trading Hub for the Americas and the central bank claimed their aim is, “To make it easier for companies in the Western Hemisphere to do business in Chinese currency”. Not quite true as all the rest of the Press Releases were about the benefits and savings for Canadian companies doing business with China and the new revenue streams for Canadian financial institutions, e.g. system is expected to save companies time and fees while creating new revenue for the Canadian financial institutions that act as hub gatekeepers.

Key features of the new RMB trading hub for the Americas are:

• Industrial and Commercial Bank of China's Canadian subsidiary will clear the transactions
• U.S. banks seeking to take advantage of the Canadian hub on behalf of their commercial clients will need to do so through a Canada-based lender and likely for a fee
• hub will convert Canadian dollars to U.S. dollars before converting them to renminbi. (It is thought that after the hub has been up and running for some time, Chinese and Canadian authorities could sign a secondary agreement that will allow for direct conversion.)

China’s BMW dealer taps offshore RMB borrowing markets

Baoxin Auto in the Shanghai tree trade zone (SFTZ) has tapped the foreign currency borrowing from offshore markets through HSBC. The Corporate Treasurer report that, “Baoxin worked with HSBC which borrowed in US dollars from an offshore market via the FTA and lending it at the offshore rate to the Baoxin subsidiary in the Shanghai FTZ, in a trade financing deal worth approximately $10 million.”

It is expected that this transaction will lower Baoxin’s funding costs by around 2% compared to its traditional borrowing from onshore banks.