Prime Minister John Key has been short changed in a symbolic first direct trade between New Zealand and China.
Just minutes after Key met with Chinese Premier Li Keqiang at the Great Hall of the People in Beijing yesterday, the two leaders traded specially selected banknotes to commemorate the deal.
China provided what appeared to be a special issue a 100 yuan banknote with the serial number AA00000000, while New Zealand traded a $20 note which had been picked for having a serial number with a large number of sevens (considered good luck in China) and no fours (a number associated with death).
While the deal to allow direct conversion between New Zealand and China was promoted as saving money for businesses, the trade in absolute terms saw New Zealand pay a higher rate.
Based on the current exchange rate according to XE.com New Zealand should have received closer to 106 yuan.
Key, a former top international currency trader, initially appeared to believe New Zealand won out on the deal, with the kiwi dollar buying 5.2 yuan "so we probably did alright out of the deal, but you'd expect us to".
When the correct figure was provided Key said "we were generous. We're here in the spirit of generosity in China".
New Zealand asked China whether direct trade between the two currencies could be considered last April.
Officials on the trip were tight lipped about whether a deal was going to be struck ahead of the state meeting, but Premier Li announced that it was to happen just seconds after the leaders sat down in opening remarks which were open to the media.
The deal is designed to improve transparency in doing business between New Zealand and China as well as providing savings in business.
Despite becoming increasingly focused on international trade, China maintains tight control over its currency, only allowing it to trade directly with a small number of currencies.
Up until today converting New Zealand dollars into Chinese renminbi had to be conducted through an intermediary currency, most commonly the US dollar.
Key said the deal was a sign of the strength of the relationship between the two countries, who conducted an estimated $18.2 billion in two-way trade last year.
"It's much quicker for consumers, it's cheaper for them, it's more predictable."
Representatives from Westpac and ANZ who attended the symbolic transaction yesterday said there would be savings, although not on a scale that the average holiday maker would notice.
"Our best guess at the start is, if you're doing a $100,000 transaction it may save you several hundred dollars," Karen Silk, Westpac New Zealand's general manager of corporate and institutional bank said, adding that this figure could grow as liquidity in the market increased. This suggested a saving of a few cents for every $100 traded.
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