Last month, the Singapore dollar became the latest currency to be allowed to trade directly with the Chinese yuan, joining an exclusive club of only eight other currencies that can do so.
Direct currency trading means companies here can exchange yuan for Singdollars, or vice versa, without having to first go through a conversion with an intermediary currency such as the United States dollar.
The move is the latest in a series of milestones marking Singapore's growing role in the internationalisation of the yuan.
The Republic overtook London this year to become the largest yuan centre outside of Hong Kong - no minor feat, given the yuan's expanding influence as a global currency. It is now the second- largest currency for trade finance, the seventh-largest for overall payments, and the ninth most widely traded currency.
The increasing currency links between Singapore and China have boosted the Republic's status as a global financial centre. They have also given local firms an edge in what is now the world's largest economy, and made conditions here more favourable for Chinese businesses looking to expand overseas.
For example, yuan-clearing facilities in Singapore allow local firms doing business in China to transact directly in the Chinese unit more easily. This lets them avoid some exchange rate risk and China-regulated foreign exchange processes, and broadens their trading and investment opportunities in China.
Singapore firms can now also repatriate surplus yuan from their China operations back to Singapore. As a regional financial centre, Singapore is well-positioned to seize the opportunities presented by yuan internationalisation to grow its financial sector - and its economic ties with China.
The Republic has a competitive advantage in the offshore yuan space, given that it is a leading regional trade and commodities hub. It is also a nexus for multinationals, many of which want to expand in China.
So it is not surprising that yuan deposits in Singapore at end-June had reached 254 billion yuan (S$54 billion) - an 84 per cent increase from June last year.
The Industrial and Commercial Bank of China (ICBC) Singapore, the only authorised yuan clearing bank here, cleared 21 trillion yuan of transactions from January to August - more than eight times what it cleared from June to December last year.
Its yuan foreign exchange turnover reached a daily average of nearly US$70 billion (S$90 billion) in June, almost quadrupling year on year.
The total value of cross-border yuan settlement between Singapore and China stood at 515.2 billion yuan in the first half of this year, accounting for 10.7 per cent of the overall offshore market.
One way Singapore can further its role in the yuan internationalisation story is to work with other offshore yuan centres, rather than compete head-on with them. This will allow Singapore, along with the other markets, to leverage on one another's strengths.
Take ICBC's issuance in September of a record 4 billion yuan of "Lion City" bonds, or yuan-denominated bonds from Singapore. Two of the three tranches were dual-listed on the Singapore Exchange and Taiwan's GreTai Securities Market, in the first such tie-up between the two bourses.
Taiwan shows rapid growth in yuan deposits, while Singapore has strengths in treasury and trade finance. Given their complementary roles, there is scope for them and other markets to collaborate in research, development and promotion of yuan products.
Once the yuan becomes globally acceptable for investment, financing and payment purposes, it can go on to serve as a reserve, intervention and anchoring currency on an international scale.
That will lead to the final stage: full convertibility of the yuan. Singapore companies, Chinese enterprises and regional regulators all have a part to play in this exciting journey.
The writer is general manager, ICBC, Singapore branch.