A new department will be set up under the central bank to oversee the recently developed pilot scheme to use the yuan for trade settlement between Hong Kong and a handful of selected mainland cities, according to a government economist who has been briefed on the plan. The Second Monetary Policy Department would also be expected to deal with a wide range of business issues concerning the yuan's use in international trade, investment, currency swap programmes with other countries and foreign aid, the economist said. The new department, with People's Bank of China vice-governor Hu Xiaolian at the helm to oversee monetary policy, is a key part of Beijing's long-term strategy to internationalise the yuan as China pushes to gain a bigger say in the world's currency system. The Second Monetary Policy Department is designed to be distinguished from the current Monetary Policy Department, which has focused on the yuan's domestic use and proposes monetary policy to the central bank's leaders. 'The most urgent task for the new department is to deal with the fast increasing use of the yuan to settle Chinese firms' trade with Hong Kong, Macau and some countries in the region, as well as some African nations,' the economist said. In July, the State Council announced that Hu had been replaced as director general of the State Administration of Foreign Exchange by Yi Gang, another central bank vice-governor. Although monetary policy is ultimately decided by the State Council, analysts said the reshuffle of institutions and personnel had implications for foreign exchange management and the country's efforts to pave the way for the wider use of the yuan. Also, Vice-Premier Wang Qishan was put in charge of a task force to make the yuan a currency for international trade. Hu had been appointed to head the task force's research team. Analysts said Hu's expertise in foreign exchange would be valuable to the yuan's internationalisation. Professor Yi Xuanrong , a financial expert with the Chinese Academy of Social Sciences, said it was necessary for the central bank to set up a new department to increase yuan business overseas and putting it under Hu would strengthen it. The world financial meltdown has encouraged officials to speed up the currency programme. China sees an erosion in US influence worldwide, stoking hopes for the yuan to become a major world currency. The yuan is not convertible for purely financial purposes, so it cannot yet be a reserve currency, but China has started to carve out a bigger international role for it. Last December, the State Council allowed the yuan to be used to settle trade transactions between Hong Kong and Macau and partners in Guangdong and the Yangtze River Delta. Then in April, exporters and importers in Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan were permitted to use the yuan in deals with Hong Kong.