Present yuan settlement in cross-border trade is carried out when the currency is not yet fully convertible. Therefore, China has to offer channels for yuan to flow out of the country for transactions abroad. This is why offshore yuan centers are set up.

At present, Hong Kong has become the most mature offshore yuan market, far ahead of others. Early in 2004, banks in Hong Kong began to accept yuan deposits. By the end of 2012, the balance of yuan deposits in Hong Kong had reached 603 billion yuan ($97.1 billion).

The central bank supports the establishment of the offshore yuan market in Hong Kong, where dollar, euro and yen are also traded. The center in Hong Kong, a global financial yuan market, is a mature system from which China can learn during the process of yuan internationalization.

This year is the 10th year for offshore yuan business since Hong Kong's experiment with the currency began in 2004, and the offshore yuan business outside China has achieved noticeable progress.

In London, an old-line global offshore market, the first yuan bond was issued by Hong Kong and Shanghai Banking Corp. (HSBC) on April 18, 2012. Targeting investors from Britain and continental Europe, this bond has a planned scale of 1 billion yuan ($161 million). The British Government set up work groups with the Hong Kong Monetary Authority and the City of London Corp. respectively in January and April 2012, aimed at establishing London as an important offshore yuan center.

In Singapore, the use of the yuan in Southeast Asian countries has greatly promoted the development of that offshore business. On February 8, China's central bank designated the Singapore Branch of Industrial and Commercial Bank of China as a yuan settlement bank.

In August 2012, monetary authorities in Taiwan signed a memorandum of understanding on cross-Straits currency clearance and settlement. In February this year, the first 46 financial institutions began yuan business. According to the SWIFT yuan tracker released on March 27, Taiwan has moved up three positions to fourth place (out of 136 countries and regions exchanging yuan payments) following a 120 percent increase of its yuan payments over six months, overtaking the United States and Australia and becoming the fifth largest center, behind Hong Kong, Britain, Singapore and France.

HSBC estimates that by 2014 the yuan will become one of the world's three major trade settlement currencies, and the proportion of global yuan payments will double to reach 14 percent.

Besides Hong Kong, Taiwan, Singapore and London, the cities of Paris, Sydney, Tokyo and Dubai are also trying to become offshore yuan centers. Yang Tao, Director of Department of Financial Markets at the Institute of Finance and Banking under the CASS, said that although the international community is not yet sure when the yuan will become as significant as the U.S. dollar and euro, they have reached consensus that the yuan will become an international currency one day. On the other hand, traditional financial centers all hope to benefit from the yuan's internationalization and vigor of the Chinese economy, which explains why international cities are competing to become offshore yuan markets.

Yang thinks in the long term, there will be multiple offshore yuan markets. The development of offshore yuan markets is decided by two factors: the willingness of governments on both sides and mutual demand for economic and financial development of both parties.

"It is impossible for a single country to have such a big piece of the yuan internationalization pie," said Yang, adding that multiple offshore yuan centers would prevent the pressure of an asset bubble and inflation in Hong Kong.