When you think of China, what first comes to mind? If you’re in any line of business, you’ve probably thought more than once about how you can expand your business there.
China is shifting from an export led economy to a service and consumption driven model. This transition will give rise to huge demands for goods, services, technology and innovation.
Trading in China
On Monday, November 30th, The International Monetary Fund executive board confirmed that China’s currency will be included in the fund’s basket of special reserve currencies along with the U.S. dollar, the euro, the Japanese yen and the British pound. The addition of the RMB marks a watershed moment in China’s economic development and symbolizes a global stamp of approval on their efforts to assume their place among the world’s economic powers.
“The Executive Board’s decision to include the RMB in the SDR basket is an important milestone in the integration of the Chinese economy into the global financial system. It is also a recognition of the progress that the Chinese authorities have made in the past years in reforming China’s monetary and financial systems,” said the IMF’s Managing Director, Christine Lagarde.
“The continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which, in turn will support the growth and stability of China and the global economy,” she added.
This is the first time in over 15 years that the list of currencies comprising the SDR has been altered.
Middle Class on the Rise
In just 3 decades, China has transformed itself from a still-developing nation to the world’s 2nd largest economy. Today, China’s middle-class population is estimated at over 320 million and is projected to grow to more than 630 million by 2022.
The middle class is becoming an increasingly important part of China’s future. As more people enjoy secure employment, they contribute to more sustainable economic growth through their strong appetite for spending and consumption. This transition towards a more sustainable economic growth model will immeasurably improve China’s long-term prospects. Through this change, China will become a more economically independent nation, thriving on increased domestic wages and consumption – which will, in turn, benefit the global economy as a whole.
Paying and Getting Paid in RMB
On December 7th, 2015, Export Development Canada (EDC) senior researcher Daniel Koldyk will be a panelist and presenter at this year’s Vancouver International Trade and Investment Summit. His presentation on the Renminbi (RMB) will focus on the rapid rise of the RMB and as an international currency and why it matters to Canadian exporters.
“We are witnessing the birth of a major new international currency,” he says. ”Within the span of the last five years, the RMB went from being virtually non-existent outside of China to one of the most used currencies for payments and trade finance in the world.”
Canadian companies wishing to expand abroad could greatly benefit from a strong Chinese market. According to Koldyk, they need to get in the game for numerous reasons; “The short answer: competition for market share, capital management and, access to customers.”
As a panelist, Daniel Koldyk will discuss the importance of the five year plan process and why it should be thought of as an economic and social blueprint for China’s near-term development.
For details on the December 7th Vancouver International Trade and Investment Summit, please check the conference website.
Thinking about expanding into China? EDC can offer a wide range of support, from help raising RMB funds, to foreign exchange risk management, to Chinese market entry strategies.