Australia plans to work with China to allow direct conversion between the Australian dollar and the yuan, which would make it the third country to have such a bilateral currency arrangement. The move is designed to help the Sino-Australian commodities trade and would pose a fresh challenge to the world dominance of the US dollar. It comes just two weeks after the South China Morning Post reported that Australia was in talks with Hong Kong and Beijing about establishing an offshore yuan market in Sydney to serve the demands of growing Sino-Australia trade. China is Australia's biggest two-way trading partner. In June, Beijing announced a plan for direct conversion of the yuan and the yen, making the Japanese currency the second after the US dollar for which direct conversion into yuan is permitted. Wayne Swan (pictured), Australia's deputy prime minister and treasurer, told a Hong Kong forum yesterday that he would discuss a range of yuan-related matters with officials in Hong Kong, already the leading offshore yuan centre, and his counterparts in Beijing. London and Singapore also plan to launch their own yuan trading centres. 'This [discussion] will include the potential for direct convertibility at some stage in the future between the Australian dollar and the RMB for transactions completed in mainland China, without pricing through the US dollar,' said Swan. The yuan is also known as renminbi, or RMB, which literally means 'people's money'. Swan is due to visit Beijing today. In March this year, the Reserve Bank of Australia, the nation's central bank, signed a 200 billion yuan bilateral currency-swap deal with the People's Bank of China, which Swan said would guarantee Australian businesses access to a ready supply of yuan when they need to settle up with a Chinese firm. 'We are determined to build on these really important steps, to ensure we are partners in the Asian century, helping to drive our region, not just passengers,' said Swan. As the economic situation has worsened in the United States and Europe, many Western nations have shifted focus and resources to Asia. Last year, US Secretary of State Hillary Rodham Clinton introduced the concept of 'America's Pacific century' in a published article, which grabbed attention from global leaders - in particular officials in Beijing concerned about fast-growing American influence and impact on Asian politics and economy. Currently, the Australian dollar is the world's fifth most-traded currency. Direct conversion between the Australian dollar and the yuan could gradually change the landscape of currency trade, part of Beijing's ambition to make the yuan a global currency in the coming decades. 'The strong and complementary Australia-China trade link has provided a strong case for using RMB in bilateral trade and investment,' said Ligang Liu, chief China economist at ANZ, Australia's third largest bank. 'Using RMB and Australian dollars directly in trade invoicing and settlement can be cost-saving. Using RMB as the funding currency for Australia's capital investment could also help the country diversify funding sources and reduce currency mismatches.'