Singapore plans to launch a facility to provide overnight yuan liquidity as trade transactions using the currency rise.
The move will help enhance the city-state's position in the fierce competition for offshore yuan business, and is another step forward in China's effort to internationalise the currency.
The facility, offering up to 5 billion yuan ($805.3 million) in overnight funds on any given day to financial institutions in Singapore, will be launched on July 1, the Monetary Authority of Singapore (MAS) said on its website.
The facility complements the existing MAS yuan facility that allows banks to borrow yuan funds on a term basis for trade, direct investment and market stability purposes.
"As the volume of RMB activities grows in Singapore, the overnight RMB liquidity facility will help alleviate end-of-day funding strains of financial institutions. This will provide a conducive environment for the continued expansion of RMB activities in Singapore," MAS Deputy Managing Director Jacqueline Loh said.
Meanwhile, the People's Bank of China (PBOC) Nanjing branch also announced on Friday that it would allow eligible corporates and individuals in the Suzhou Industrial Park (SIP) to conduct cross-border yuan transactions with Singapore.
Banks in Singapore will be able to carry out cross-border yuan lending to companies in SIP, and corporates in SIP can issue yuan bonds in Singapore.
Equity investment funds in SIP will also be enabled to conduct direct investment in corporates in Singapore and individuals in SIP can conduct yuan remittances between the two countries for the settlement of current account transactions and direct investment in corporates in the city-state.
Competition to be the next offshore yuan centre behind Hong Kong has intensified as China accelerates efforts to promote its currency to regions beyond Asia.
China Construction Bank (CCB), China's second-largest lender, has been selected to become the first clearing service for renminbi trading in London, the Financial Times reported, citing people close to the decision.
Britain and China signed an agreement last month to set the service up, days after Germany clinched a similar deal.
Yuan payments rose in value by 29 percent in March from a month earlier and gained one place to seventh position as a global payments currency, latest statistics from SWIFT showed.
