The Chinese yuan, also known as the renminbi, is already convertible under the current account - the broadest measure of trade in goods and services. However, the capital account, which covers portfolio investment and borrowing, is still closely managed by Beijing because of worries about abrupt capital flows.
Canada steps up push to create yuan trading hub
Canada is stepping up efforts to become North America's first yuan trading hub as China looks to open up its capital markets.
Canadian Finance Minister Jim Flaherty received a personal briefing on the matter last year from government officials before a meeting with HSBC executives, documents obtained under Canada's Access to Information Act showed.
"Canada's strengthening commercial relationship with China provides an excellent opening for Canadian financial institutions to explore opportunities in yuan," Jack Aubry, a finance department spokesman, said last month. "The government of Canada supports private-sector-led initiatives towards this objective."
China has already signed agreements to trade its currency more freely with Singapore, London and Frankfurt as part of an economic restructuring that includes taking steps to loosen exchange controls.
A memorandum to Flaherty from his deputy, Michael Horgan, dated June 26 last year, with the subject line "Meeting with HSBC Canada" lists "[yuan] trading hub" as a topic for discussion. The entire section was redacted, with the exception of a line that says "the Toronto Financial Services Alliance is engaged on the [yuan] trading hub issue".
Turnover in the yuan jumped to the equivalent of US$120 billion a day by April last year, up from US$34 billion in April 2010, as it became the ninth-most actively traded currency with a 2.2 per cent share of global volumes, the Bank for International Settlements said in its latest triennial survey of currency traders released in September.
Another memorandum to Flaherty from Horgan, dated March 18 last year, talked about "developments in [yuan] trading opportunities for Canada]. It outlined China's recent push to internationalise its currency and described the efforts of Taipei, Singapore and London to acquire trading-hub status. Parts of the document were redacted.
The Toronto Financial Services Alliance is a public-private partnership that includes representatives from the federal, provincial and municipal levels of Canadian government, as well as financial services companies, schools and industry associations, according to its website. HSBC Global Asset Management Canada is also listed among the members.