China, New Zealand agree to trade directly in RMB
BUSINESS
By Wang Xinxin

2017-05-01 14:59 GMT+8

New Zealand's biggest exporter of dairy products, Fonterra, has made a ground-breaking funding agreement with the Bank of China to trade directly in renminbi, establishing a first-of-its-kind multi-currency debt facility worth 300 million US dollars. 
The company's direct investment in Chinese dairy farms is part of a growing bilateral trade relationship between the two countries, and experts believe business between the two countries could be boosted by the China-proposed Belt and Road Initiative.
“Because we're raising the money in RMB, and we want to spend it in RMB for the expansion of our business in China, it gives that flexibility - enables us to support the integrated business that we're building in China,” said Philip Turner from Fonterra. 
Using the Chinese currency will reduce Fonterra's transaction costs and help finance its rapidly growing herd of 30,000 cows in China. The company hopes the looming upgrade of China's Free Trade Agreement with New Zealand will further boost exports and investment.
Cross border inter-bank transfers by the Bank of China - in real time - should also stimulate more Chinese investment in New Zealand.
The Industrial and Commercial Bank of China is one of three big Chinese banks open for business in New Zealand. Over the past year, corporate and residential lending has more than doubled as business picks up - and more deals get done.
Fonterra has also partnered with the Chinese e-commerce giant, Alibaba, to explore the use of block chain technologies to raise food safety standards.
QR codes are now being printed on infant formula cans to improve traceability, and Fonterra recognizes the potential value of e-commerce in China where online sales are booming.
“China's already our number one market today. It's expanding really rapidly. In many ways Chinese consumers are showing us the way forward. They are the most wired consumers in the world. we are already doing a lot of sales by e-commerce.” said Turner.
As the first developed country to sign a cooperation agreement to support China's Belt and Road Initiative, it's expected that New Zealand will attract more investment from Chinese banks and construction companies.

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