The prospect of a fully exchangeable Chinese currency will move a step closer this month when Travelex offers business customers the opportunity to trade directly with authorised Chinese companies.
The move comes at a time when the dollar's long-standing role as a reserve currency is under threat. China's economy is powering ahead and overtook Japan as the world's second-largest economy last year, a title Japan had held for more than 40 years. It is only a matter of time before it will leapfrog the US and claim the number-one spot.
The international payments firm says the service will save time and money as demand for the yuan grows. David Sear, global managing director at Travelex Global Business Payments, believes this will happen within the next three years. He said: "The renminbi [yuan] is going to be a currency people want to hold. The time is going to come when the dollar is not the world's reserve currency any more."
Some experts see the yuan becoming a reserve currency within five years. According to the People's Bank of China, cross-border trade settled in yuan under new scheme regulations is growing rapidly, reaching $78bn (£47bn) in 2010 and 2011 volumes had exceeded last year's total by April.
Travelex will roll out the yuan payments service in China at the end of June. It has 38,000 business customers in 14 countries and deals with more than 750 financial institutions. Sear explained that China's liberalisation had been crucial: The number of Chinese businesses that are authorised to receive payments in renminbi from overseas companies soared from 350 last year to more than 3,000. Traditionally, companies exporting to China have had to deal with intermediaries and pay in US dollars, typically incurring 6-10% in transaction fees.
Sear said: "The historical significance of a fully convertible renminbi cannot be understated and the movement away from using the US dollar as the default settlement currency has already begun. Making renminbi payments available provides easy access for a wide range of small businesses, corporates and partners, who previously had to rely on a relatively small number of major banks. It was only available to the exclusive few doing big transactions."
"The importance of China as a trading partner, not only to the UK but the world, has been immense over the last 20 years and has accelerated over the course of the recession. The whole world is reliant on Chinese growth," he added.