An HSBC forecast projected that by 2015, the yuan will become one of the three most used currencies in global trade, in league with the dollar and euro.
The Reserve Bank of Australia announced in April it will transfer 5 percent of its foreign currency reserves ($2.1 billion) into Chinese bonds, deepening ties with its Pacific neighbor and biggest trade partner, and reflecting a global shift to the yuan.
The yuan has been dubbed a ‘hermit currency’, isolating itself from foreign investment and setting its own rules, but is now slowly entering world currency markets.
The top-five currencies for international payments in January 2013 were the euro (40.17 percent), the US dollar (33.48 percent), the British pound (8.55 percent), the Japanese yen (2.56 percent), and the Australian dollar (1.85 percent).
“The world’s reserve currencies are distributing away from dollar centrality to a broader spread of currencies.
The world economy wants to diversify the set of reserve currencies as a way from the volatility and the problems associated with the current reserve currencies, because both the US and Europe are plagued by economic problems.
The yuan only comprised a 0.63 percent market share of the global currency market as of January 2013.
The yuan hasn’t been officially available for foreign trade, but ‘dim sum bonds’, a bond dominated in Chinese yuan assets and issued in Hong Kong, has allowed foreigners a loophole to invest in domestic Chinese debt.
The yuan hit a 19 year high on April 26 at 6.1616 against the dollar after the PBoC loosened controls on the reference rate to increase investment, as well as an effort towards making the yuan a ‘floating’ currency by 2015.
China insulates the yuan under strict government controls but has recently taken steps to trim the nation’s reliance on the dollar by establishing demand for their own currency.