Singapore is already benefiting from the rise of the yuan. The country became the first offshore yuan hub outside Greater China in 2013, with the Industrial and Commercial Bank of China designated as the only bank to clear offshore yuan transactions here.

Singapore is now the third-largest offshore centre for yuan clearing, according to the latest data from Swift, a firm that provides a financial messaging service for banks around the world.

Hong Kong remains the world's largest offshore yuan centre, processing 72.5 per cent of all payments made in the Chinese currency, followed by London at 6.3 per cent, and Singapore at 4.6 per cent.

Cross-border yuan initiatives between China and Singapore are expanding - since March, companies in Chongqing, in China's south-west, have been able to issue yuan bonds in Singapore and repatriate fully the funds raised.

Similar cross-border yuan channels had previously been implemented in Shanghai and Tianjin.

These are seen as significant moves for Singapore as a financial centre, as banks here can now play a bigger role in trade and investment flows between China and the region and beyond.

However, the path is not proving to be one of steady growth.

Singapore's yuan deposits, a key driver to growing the offshore market, fell 16 per cent to 189 billion yuan (S$40 billion) from the third to the fourth quarter last year, as the currency lost its lustre following multiple yuan depreciations.

The close relationship between China and Singapore has also given rise to other challenges, as seen by the drag on the economy here due to a slowing China. China is Singapore's largest trading partner, with bilateral trade between the two countries amounting to S$123.5 billion last year.

Chia Yan Min