CHINA sees Singapore as its regional partner for the extension of yuan internationalization, according to a DBS Bank report published today.
Before the Spring Festival, the People's Bank of China named the Industrial and Commercial Bank of China Singapore branch the clearing bank for yuan in Singapore.
"Having given Hong Kong a good eight-year head start, China is now turning to other regional partners to launch the next phase of yuan internationalization," says the report by DBS, the biggest bank in southeast Asia.
According to DBS, the pool of yuan deposits in Singapore reached 60 billion yuan (US$9.5 billion) last year.
China was Singapore's third-biggest trading partner.
Total trade between the two countries reached S$104 billion in 2012.
"Once the clearing mechanism is set up (in Singapore), there will be greater transparency in the movement of yuan funds," says the report.
"The city-state will be the gateway for China in the Southeast Asia, which provides a platform for Beijing to facilitate wider use of yuan in trading with Southeast Asian nations," it adds.
However, Hong Kong remains the dominant offshore center of the Chinese currency, says the DBS study.
Hong Kong currently handles more than 80 percent of yuan payments worldwide.
The emergence of new offshore centers expands the existing regime instead of creating competing systems, therefore the city's dominant role remains, said DBS.