The Chinese yuan, also known as the renminbi, is already convertible under the current account - the broadest measure of trade in goods and services. However, the capital account, which covers portfolio investment and borrowing, is still closely managed by Beijing because of worries about abrupt capital flows.
Yuan overtakes euro to become second-most used finance currency
The yuan has surpassed the euro to become the second-most commonly used currency in global trade finance, after the US dollar.
Yuan usage in trade finance grew to 8.66 per cent in October from 1.89 per cent in January last year, according to the Society for Worldwide Interbank Financial Telecommunication (Swift).
The dollar is still unrivalled at the top spot with a share of 81.08 per cent.
At the beginning of the year, the yuan ranked fourth in the global trade finance market after the euro and the Japanese yen.
"The [yuan] is clearly a top currency for trade finance globally and even more so in Asia, as shown by Swift's business intelligence statistics on the pace at which China's exporters and importers and their counterparts are using the [yuan] for letters of credit," said Franck de Praetere, the head of payments and trade markets, Asia-Pacific, at Swift.
Swift is one of the largest financial messaging systems in the world.
In October, the yuan was the 12th payments currency. Yuan payments increased in value by 1.5 per cent year on year in the month.
"Payments" indicate the total transaction by Swift users to settle payments for goods and services while trade finance refers to letters of credit, export credit and insurance, and collection.
Swift's findings come as China pushes hard to internationalise the yuan.
The People's Bank of China on Monday published a blueprint for the Shanghai free-trade zone, a key test bed for full yuan convertibility.
In a six-page report that included 30 detailed instructions, the central bank said it would allow residents of the zone to set up "resident free-trade accounts" in domestic and foreign currencies, and would allow yuan to be fully convertible under those accounts "when the time is ripe".