Next step

But becoming an international trade currency is only the first step in the renminbi's progress to become a global reserve currency. The next key step is to turn it into an investment currency, because global investment flows are far larger than trade flows.

To achieve this, many offshore renminbi products have been developed in recent years. One notable example is the offshore renminbi bond, which helps companies to raise funds in offshore renminbi.

France leadseurozone in offshore RMB payments

RMB clearing bank in London within sight

Currently Luxembourg Stock Exchange lists the second-largest number of offshore renminbi bonds globally after Hong Kong.

That doesn't appear surprising considering that the Luxembourg bourse always had a global focus, especially after listing the first eurobond in 1963.

"We were interested in international business early on and have become good at listing bonds. We have developed additional after-sale services for issuers, so it's not just a one-off service," says Robert Scharfe, CEO of the Luxembourg Stock Exchange.

Scharfe says listing a large number of renminbi bonds on the Luxembourg Stock Exchange brings numerous benefits to the local economy, despite the fact many issuers and investors of the bonds are not based in Luxembourg.

In addition to the listing fees received by the stock exchange, Luxembourg's local law firms and banks also gain from such moves because they can provide services to the bond issuers. Their proximity to and understanding of the Luxembourg investment environment is of great help to the bond issuers, Scharfe says.

Because most of the bond listings are structured using a special-purpose vehicle for legal and tax reasons, many of these SPVs are domiciled in Luxembourg. Most of the bond transactions are cleared by Clearstream, a Luxembourg-based clearing house.

Elsewhere in the world, Asian financial centers such as Singapore, Taiwan and Macao are following Hong Kong's footsteps to grow offshore renminbi activities, fully utilizing their advantage of geographical proximity to the onshore Chinese mainland market.

Industrial and Commercial Bank of China in Singapore and Bank of China in Taiwan and Macao have been appointed as official clearing banks over the past few years, giving a boost to the liquidity of offshore renminbi flows to the three centers.

Last March Singapore and China also doubled the value of its swap line to $48 billion, three years after it was initially established.

Under a swap agreement, central banks agree to exchange each other's currency and can then lend the money out to domestic banks in cases of emergency. It is considered an effective tool to boost market confidence in the renminbi.

Another key driver behind Luxembourg's progress in developing offshore renminbi activities is the growth of Chinese banks in the city.

Top 10 overseas travel destinations

Top 10 most-used currencies in the world