The buck does stop here: Chinese currency set to close the gap between it and the dollar

China's currency, the renminbi (RMB), is looking to become the third-largest international currency behind the U.S.'s dollar and the euro by 2019 said the Renmin University of China in a report published on July 20.

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LOS ANGELES, CA (Catholic Online) - Last year, the RMB cross-border trade settlement amounted to 4.63 billion yuan-roughly $746 billion-up 57.5% from 2012. The Chinese currency accounted for 2.5% of all worldwide cross-border trade settlements.

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By the end of 2013's fourth quarter, direct investment in the RMB amounted to about 433 billion yuan, 1.9 times the same period in 2012.

Currently, the RMB is the fifth-most widely used international currency, behind the British pound in third, and the Japanese yen at fourth.

The offshore yuan market has seen rapid development in recent years, and this year the People's Bank of China signed a memorandum of understanding regarding the yuan clearing and settlement arrangements with central banks in the UK, Germany, Luxembourg, France and South Korea.

Despite the rapid expansion the RMB has seen, massive internationalization will still see many challenges, including the technical issue of having the currency used internationally.

"To resolve the problem, China has to build a safe, efficient and low-cost offshore RMB clearing system as soon as possible," said Chen Yulu, the president of Renmin University and member of the central bank's monetary policy committee.

"In addition, the regulators must create a legal framework for the offshore RMB market and make sound regulations to stop money laundering and tax evasion via offshore yuan transactions."

Part of this increase is due to the growth of Chinese economic power, and an increasing number of countries have become willing to accept the RMB as a reserve currency. At the end of 2013, the People's Bank of China had signed currency trade agreements involving 2.57 trillion yuan with 23 countries and regions.

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