London has overtaken Singapore as the second-largest offshore centre for yuan clearing, according to Swift.
The firm, which provides a financial messaging service for banks around the world, said in a report yesterday that yuan payments made into and out of London rose by 21 per cent between March 2014 and last month.
This means that London now processes 6.3 per cent of all yuan payments made across the world, making it the second-largest offshore yuan-clearing centre after Hong Kong.
Singapore overtook London in February 2014, but the trend started to reverse at the start of this year, Swift said.
Hong Kong still remains the world's largest offshore yuan centre, processing 72.5 per cent of all payments made in the Chinese currency. Singapore, in third place, handles 4.6 per cent.
Swift data shows that 40 per cent of all payments made between London and China or Hong Kong are exchanged in yuan.
"The Chinese currency is by far the most used in this corridor, followed by the Hong Kong dollar (24 per cent) and the British pound (12 per cent)," Swift said.
Swift's managing director for Britain, Ireland and Nordics, Mr Stephen Gilderdale, said: "Offshore yuan clearing centres are driving greater use of the currency in global trade, and countries such as Britain are reaping the benefits."
HSBC Singapore chief executive Guy Harvey-Samuel said Singapore has been a leader in developing the necessary infrastructure to enable cross-border flows of the yuan, but "clearly, we must not rest on our laurels".
He added: "Singapore can further encourage local investment and raise yuan liquidity by supporting yuan bond issuances for corporates and, in the longer term, facilitate fresh equity raisings denominated in yuan to tap the vast appetite for investment products in China."
A move last month by China to allow companies in Chongqing to issue yuan bonds in Singapore and repatriate fully the funds raised, will be a boon, he said.
"Liquidity attracts liquidity, and history has shown us that new opportunities will naturally follow existing flows. Initiatives such as these will no doubt play an important role in increasing Singapore's level of yuan liquidity and contribute to the growth of the offshore yuan market in Singapore."
Last month, the yuan remained stable in its position as the fifth most active currency for global payments by value, with a share of 1.88 per cent, a slight increase from 1.74 per cent in February.
The value of global payments made in yuan rose by 18.46 per cent between February and last month.
Overall, global payments in all currencies increased by 10.67 per cent between February and last month.