ANZ, HSBC and Westpac will be market makers for the direct convertibility of the New Zealand dollar and the renminbi on the Chinese foreign exchange trading system. This follows an agreement between the New Zealand and Chinese governments to allow banks to directly trade the two currencies.
Westpac says making the Kiwi convertible with the renminbi will reduce transactional costs including currency conversion costs, and over time increase liquidity for currency deals between New Zealand and China. The licences come from the People's Bank of China.
The announcement of currency convertibility was made during Prime Minister John Key's visit to China. The NZ dollar is among the first half dozen currencies to be made fully convertible with the renminbi after the US dollar, Japanese yen, Australian dollar, Russian rouble and Malaysian ringgit.
When the Australian deal was revealed last April, ANZ and Westpac were also announced as the two initial market makers. HSBC also quickly gained approval.
Touted benefits for New Zealand businesses include cutting out the need to cross through the US dollar, reduced costs of trading, and increased visibility of New Zealand business in China. It will also let New Zealand and Chinese companies invoice each other in renminbi and allow payments to be cleared directly between banks in New Zealand and China.
“China-New Zealand trade is a long term growth story. As one of the first banks to offer direct convertibility for mainland China transactions, Westpac plays an important role in this connexion, making it easier for our customers to do business in China,” Westpac NZ CEO Peter Clare said.
ANZ China CEO Charles Li said direct currency trading has economic, trade and investment significance for both countries as it will improve trade flows and reduce costs for companies doing business between New Zealand and China.
“I’m pleased ANZ China has received approval to act as a market maker as the relationship between China and New Zealand continues to develop. As the largest bank in New Zealand with the largest footprint in China, we’re in a unique position to really strengthen trade flows," said Li.
HSBC also said it had received approval from the People’s Bank of China to be one of the first market-makers for direct trading of the renminbi and New Zealand dollar in China’s onshore interbank foreign exchange market.
According to Westpac, the renminbi is now ranked the second most used currency in trade finance by SWIFT.
Here's a statement from Key
Prime Minister John Key and China’s Premier, Li Keqiang, today announced the launch of direct trading of the New Zealand dollar against the Chinese renminbi in the Chinese onshore market.
Mr Key is in Beijing on the first day of his official visit to China, and met Premier Li Keqiang at the Great Hall of the People.
“It’s great to have been in Beijing to witness the conclusion of negotiations to launch direct trading of the New Zealand and Chinese currencies, which I kicked off during talks with President Xi on the margins of the Bo’ao Forum in April 2013.
“I am delighted that the project has been brought to a successful conclusion so quickly. It highlights the strong relationship and goodwill between New Zealand and China,” says Mr Key.
Mr Key says this important step will make doing business with China easier by reducing the costs of converting between the two currencies, and will stimulate trade and investment.
“Direct trading will also increase the integration between the New Zealand and Chinese financial systems, and deepen the economic relationship between the two countries. During 2013, trade in goods between China and New Zealand was worth $18.2bn, up 25.2% on the previous year. China is now New Zealand’s top destination for exports of goods,” says Mr Key.
The New Zealand dollar is only the sixth currency to be directly traded with the renminbi. The other currencies are the US dollar, Japanese yen, Australian dollar, Russian rouble and Malaysian ringgit. Previously, organisations that needed to trade the New Zealand dollar against the renminbi had to do so indirectly with two trades against a third currency, usually the US dollar.
The Prime Minister says the New Zealand government continues to work with New Zealand banks, other financial institutions, and exporters and importers who trade with China, to raise awareness of the benefits of pricing in the two currencies and how direct trading can help.
“Today’s announcement will further reduce the costs of trade and investment transactions between New Zealand and China, increasing the ease of doing business for the benefit of businesspeople in both countries,” says Mr Key.