Canada has renewed its bid to become a renminbi hub, but the recent cooling of its relationship with China amid spying allegations and a stalled trade pact could prove a setback for progress on this front.

The Toronto Financial Services Alliance (TFSA) and AdvantageBC International Business Centre in Vancouver last week announced they would work together with officials from the federal, Ontario and British Columbia governments to push for renminbi quota.

Toronto had been vying with Vancouver to host what would be North America’s first RMB hub if either were awarded a quota.

“The process [of obtaining a quota] is believed to take around nine months from beginning to end,” said Andy Seaman, manager of Stratton Street Capital’s Renminbi Bond Fund in London.

A source familiar with Canada’s bid pointed to the coming Apec summit in Beijing this November as a potential opportunity for China to award the country a renminbi qualified foreign institutional investor (RQFII) quota.

“Any government is going to have to take a steer from the industry," said Seaman. "If there’s no demand from any of the managers, then they are not going to push for it. There is an incentive for people being aware of the discussions before they are announced."

Canadian prime minister Stephen Harper is scheduled to attend the Apec meeting, and a full-blown state visit has been mooted in the media. In July, Chinese foreign minister Wang Yi held talks with Canadian foreign minister John Baird and vowed to take economic and financial ties to the next level.

“With strong ongoing interest from both government and businesses alike, Canada is well on its way in becoming a major RMB centre in North America,” said William Zhu, chief executive of Industrial and Commercial Bank of China (Canada).

The federal government has been backing Toronto and Vancouver’s bids since early this year. But now that the two cities have combined their efforts, the push is gaining momentum.

“We have been pleased at both the financial industries and Ottawa’s interest in moving this forward,” TFSA president and chief executive Janet Ecker told AsianInvestor. “The industry is working on the details of what kind of infrastructure is required to make it happen, if both governments agree.” 

The TFSA is a public/private body set up to promote Toronto as a global financial centre. It is co-chaired by BMO Financial Group, HSBC Bank Canada and mainland groups Bank of China and ICBC.

Ecker said the arrangement and settlement of deals involving renminbi would not happen only in one location. 

“While Toronto is the financial capital of the country and the second largest financial centre in North America, this is a pan-Canada initiative that may well involve companies doing business across the country,” she said.

But Harper has riled China by banning journalists from news media Xinhua and People’s Daily from a trip to the Arctic with him that began on Wednesday last week in the latest development in a series of hacking and spying allegations.

In July, Canada alleged that Chinese state-sponsored hackers had attacked its National Research Council.

This comes in addition to growing unease in Canada over Chinese investment in the country’s resource industries. In December 2012, Canada’s government approved a controversial $15.1 billion bid from China National Offshore Oil Corporation (Cnooc) to buy Calgary-based oil-and-gas company Nexen.

“There are always bilateral issues between countries, but the overall economic and trade relationship between Canada and China is strong and growing,” Daniel Malik, director of policy and research at TFSA told AsianInvestor.

Luo Zhaohui, China’s ambassador to Canada, stepped in to smooth relations last week. In a newspaper article, he said negotiations on bilateral currency swap arrangements and the establishment of an offshore RMB trading hub in Canada had made progress.

A wide-ranging trade pact was signed between the two in November 2012, but was challenged in court by a community in British Columbia. Though a court dismissed the challenge, the community has appealed, effectively delaying cabinet ratification of the pact.

Trade between Canada and China increased 60% to $73 billion in 2013 from 2012.

Meanwhile, Australia is said to be set to receive quota soon. In late July, Shanghai-based consultancy Z-Ben Advisors speculated that Sydney was poised to receive an RQFII quota after Bank of China's RMB clearing facility went live in Australia on July 29.

In July, China awarded Frankfurt and Seoul quotas of Rmb80 billion ($13 billion). And in March, Paris also received Rmb80 billion in RQFII quota. London and Singapore were the first two cities beyond Hong Kong to win quota, in October last year.