The economic ties between New Zealand and China have been strengthened now a new currency deal has been announced which allows direct trading of the two nations’ currencies.
Currently, when changing Yuan into the New Zealand dollar or vice versa, transactions have to first be converted into an intermediate currency – usually the US dollar.
By removing the ‘middle man,’ costs will be reduced for exporters and importers.
China’s Premier Li Keqiang and New Zealand Prime Minister John Key announced the new currency agreement during the latter’s official visit to China this week.
Negotiations were said to have began at the Bo’ao Forum in April 2013; meaning the deal was struck relatively swiftly.
“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,” Key said.
“I am delighted that the project has been brought to a successful conclusion so quickly. [And the deal] highlights the strong relationship and goodwill between New Zealand and China.”
Key went on to note that the agreement “will stimulate trade and investment.”
New Zealand’s Government will work “to raise awareness of the benefits of pricing in the two currencies and how direct trading can help” with financial institutions, exporters and importers.
The People’s Bank of China has given Westpac the authority to act as the new intermediary for China Foreign Exchange Trading System direct trading of the New Zealand dollar and yuan.
China’s determination to internationalise the Yuan has seen it launch currency ties with Brazil (the county’s largest trade partner), Australia, Russia, the United Arab Emirates and Turkey.
The process was begun in November 2010, when China and Russia decided to cease using the US dollar for bilateral trade.
Within the Chinese bank market in Shanghai, the yuan began trading against the ruble immediately. And in December 2010, the same began on the Moscow Interbank Currency Exchange.