Australia is holding preliminary talks with Hong Kong and Beijing about establishing an offshore yuan market in Sydney to serve the demands of growing Sino-Australia trade and boost the currency's global standing.
The move came after London and Singapore announced plans to launch their own yuan trading centres. It also coincides with yesterday's announcement that Beijing will further develop the offshore yuan market in Hong Kong as part of a new package of policies to mark the 15th anniversary of the handover.
Hong Kong was picked by the central government in 2009 as the first proving ground to settle cross-border trade in yuan outside the mainland market.
People familiar with the matter said officials in Hong Kong and Beijing had so far been co-operative with Australia over the move.
'The Chinese side has made it clear to Australian officials that although London has launched the first offshore yuan market outside Hong Kong, it doesn't necessarily mean London has the exclusive right to do so,' said one of the people, who declined to be identified as he was not authorised to speak to the media.
'I think Beijing wants to see some competition [among different offshore yuan centres] that will help boost trading volume and thereby increase the importance of the yuan potentially as a new global currency.'
Australian Deputy Prime Minister Wayne Swan, who is also treasurer, is scheduled to visit Hong Kong in early July for a yuan-related forum where he will meet representatives from Australian banks and companies in Hong Kong to seek their advice on how the currency can play a more important role in bilateral trade.
Swan is also expected to visit Beijing to discuss a wider range of issues including the long-awaited Sino-Australia Free Trade Agreement (FTA) negotiations that began in 2005. Although there is no time frame for when a final FTA deal can be reached between the two countries, many financial and political analysts expect that it should not take long.
'Given the close trade relationship between China and Australia and its sophisticated financial infrastructure, Sydney has a natural advantage in becoming an offshore centre for the renminbi business,' said Dr Ligang Liu, chief China economist for ANZ, Australia's third- largest bank.
China and Britain agreed last year to co-operate on developing London into an offshore yuan centre. Since then, London has been speeding up efforts primarily to serve the European market. Singapore is doing the same, but mainly with an eye on yuan trade in Southeast Asia.
China is already Australia's largest two-way trading partner. Australia's neighbour New Zealand signed an FTA deal with Beijing in 2008. If Sydney could serve as an offshore yuan market with a focus on Sino-Australian trade, it could also naturally cover trade settlement in New Zealand, market participants say.