The Chinese currency is stepping steadily towards internationalization. Chinese officials say the strategy to reach that goal comes in three stages.
The first is to explore settlement functions for the yuan and to increase use of the currency worldwide. That's why the government initiated the Cross-Border Trade RMB Settlement Pilot Project in 2008.
The pilot project allows businesses in certain parts of China to import and export in the yuan. Also at the same time, RMB offshore trading hubs have been set up in such world financial centers as Hong Kong, London and Paris.
The second stage is to expand the number of qualified foreign investors who want to invest in the Chinese securities market. The move will boost the two-way flow of the yuan between China and other parts of the world.
The government has launched the Qualified Foreign Institutional Investors program, and a similar but yuan denominated RMB Qualified Foreign Institutional Investors program. A total of 392 financial institutions had joined the programs by the end of last year.
The third stage, is to fully realize the marketization of the yuan's interest and exchange rates. That will be a long-term uphill battle. The final goal will be to make the RMB an internationally recognized reserve currency.