During Canadian Prime Minister Stephen Harper's visit to China in November, it was announced that a clearing hub for the yuan, or renminbi, would be established in Toronto, the first such hub in the Americas.

The Canadian subsidiary of the Industrial and Commercial Bank of China Ltd has been designated as the hub's clearing bank, and the president of the Canadian unit, William Zhu, described the time challenge to the House of Commons finance committee on Tuesday.

That challenge is a "quite limited time window for us to implement it because China is liberalizing (its) capital account I guess in the future three or four years," Zhu said.

"So we've only got four years to take advantage of (the) renminbi clearing center to fully utilize our competitive advantages."

Zhu announced a March 23 launching ceremony for the clearing function of the Canadian hub, which will enable companies trading with China to settle transactions in the Chinese currency itself, rather than having to use the U.S. dollar or other currencies as intermediaries.

Speaking to reporters, Zhu urged Canadian banks to develop a full suite of products in renminbi which can serve clients in Canada and outside the country.

Zhu also said that since Canada is only a medium-sized market, the hub will need to link up with companies throughout North and South America to generate larger trading volumes.

During the same committee testimony, Bank of Canada official Paul Chilcott described the use of the swap agreement set up in November between the Canadian central bank and its Chinese counterpart, the People's Bank of China.

The agreement, which would allow for the swap of Canadian dollars for up to 200 billion yuan ($32.0 billion US), is intended only as a last resort to support the stability of the Canadian financial system, not to provide credit backstop for any particular investor.

"The bar would be very high," Chilcott said. "Institutions have to manage their renminbi liquidity just as they have to manage their liquidity in other currencies on their own account, including having plans in stressed circumstances."

(Reporting by Randall Palmer; Editing by James Dalgleish and Christian Plumb)

By Randall Palmer