The Chinese Yuan (Renminbi) is becoming like a reserve currency.

[UK £10 = 103 Chinese RMB/Yuan = US$16 = Euro €11 = Singapore$19 = Hong Kong$124 = Australia$15 = Japanese Yen 1297]

The Central Bank of Sri Lanka has given approval for the Renminbi to be used in cross-border banking transactions, in a move that underscores the growing internationalisation of the Chinese currency as well as the close ties between the two countries. The central bank said its monetary board had agreed to allow the use of the Renminbi in international banking deals because it would significantly facilitate the growing volume of trade and investments between Sri Lanka and China.

China is today as the world’s second-largest economy, while also being a leading player in international trade, investments and foreign reserves. It also enjoys extensive economic connections with many countries; as a result the Renminbi has been gradually evolving as a globally accepted currency. The Renminbi is allowed in international transactions by several countries, including the US and the UK. However, Sri Lanka’s decision to allow the currency highlights its strengthening relationship with China.

Beijing has forged closer political ties with Sri Lanka and has been the biggest source of foreign funding to the country in recent years. China is also playing a big part in helping Sri Lanka with reconstruction following the end of the country’s 25-year civil war two years ago.

Beijing has been encouraging the use of the Renminbi as an international alternative to the US dollar. Over the past two years renminbi cross-border trades deals have surged.

Much of the activity around the currency has focused on Hong Kong, initially chosen by the Beijing to act as a launch pad for the currency’s expansion beyond mainland China.