The world is pushing to do more business in the currency as it is seen to be fairly valued

South Korea, which sends around a quarter of its exports to China, is one of the few countries in the world to run a trade surplus with the Asian giant.

South Korea gets components and resources from China and sends back semiconductors, machinery, cars, ships, mobile phones and television sets. In March, South Korea enjoyed an $8.4 billion trade surplus. Last year, trade between the two countries added up to $290 billion.

Both countries want more of this trade to be done in yuan, which would make trade cheaper by avoiding the need to convert funds into US dollars or euros before completing trades.

Earlier this year, South Korea became one of the newest offshore yuan trading centers.

"What the (South) Korean government has done is make sure that the country enjoys the full benefit of keeping the money onshore," says Wenlin Juang, head of market development for North Asia with news agency Thomson Reuters.

South Korea is not alone in pushing to do more business based on the Chinese currency, particularly in Asia where the Chinese mainland is the largest trading partner of many countries in the region. In fact, rare is the country in the region that is not working hard to take a larger chunk of yuan-denominated business.

The yuan's momentum will get a fillip if the International Monetary Fund includes the currency in its special drawing rights basket in October.

This would make the yuan one of just five global currencies included in this elite pool of global reserve currencies. At the moment, the SDR includes the greenback, the euro, the UK pound and the Japanese yen.

At the moment, there are more than 60 central banks around the world that invest in the yuan, and China has currency swap agreements with 30 countries. As of April, currency swap deals had added up to 3.14 billion yuan ($500 million).

In Asia and surrounding regions, the Chinese mainland has agreements with Hong Kong, Macao, South Korea, Malaysia, Indonesia, Singapore, New Zealand, Uzbekistan, Mongolia, Kazakhstan, Russia, Thailand, Pakistan, Australia, Sri Lanka, Qatar and Nepal.

"The use of the RMB outside the mainland has picked up a lot of speed in the last few years," said Vincent Lee, executive director of the Hong Kong Monetary Authority at a conference last month.

"We can now use the RMB for all trade-related transactions with China and increasingly we can also use the RMB either for people investing into China, or for mainland people, if they want to take money out of China and invest overseas, they can also use the RMB."

The HKMA is working to leverage its position as the regulator in the largest offshore market in the world and is taking its show on the road to Malaysia and Thailand, among other countries, hoping to expand the use of the Chinese currency and ensure more of that money flows through Hong Kong.

The new reality - that there is very little that cannot be done in global trade or finance using the yuan - may prove to be good news for China's Asian trading partners.

Many have long relied on the US dollar for international business and investment, even as their relationship with China has grown in importance in terms of magnitude.

With the dollar strengthening, many of these countries are questioning the wisdom and economic impact of a total reliance on the greenback.

Malaysia, Indonesia, Singapore and South Korea have emerged as key players in global yuan markets, complementing the strengths of Hong Kong, Macao and Taiwan, and acting as a springboard for a more international reception for the Chinese currency.

And as the dollar has appreciated against other international currencies, the yuan has remained steady and is now closer to being fairly valued than it has ever been.

In fact, the IMF is getting ready to make an official statement to this end sometime this year. Officials have been hinting at this possibility for several weeks.

"Since last year we have seen, as you have noted, a very significant appreciation of the RMB in real effective terms," said Markus Rodlauer, deputy director and mission chief for China at the IMF, during a news briefing in mid-April.

"It has been mostly stable, depreciating a little bit against the dollar because, as the dollar went up, in effective terms, (the yuan) has gone up by over 10 percent.

"If you add that up, last year (the yuan was) moderately undervalued and now it has gone up," said Rodlauer. "We are now reaching a point where we are close to it no longer being undervalued."

The IMF is now updating its 2014 assessment and an official report will come out later this year.

For the time being, the overall dominance of the dollar in world trade is assured. The greenback is by far the most used reserve currency in the world, but the yuan has emerged as a well-priced alternative.

A number of disparate factors suggest that the influence of the yuan is only likely to grow.

The first is the increasing likelihood that the IMF will include the currency in its SDR.

In October, the IMF will carry out a once-every-five-years review of the currencies included in the SDR basket. And "one important issue in the review will be whether the RMB will be included," said Zhou Xiaochuan, governor of the People's Bank of China, speaking last month before the IMF's International Monetary and Financial Committee.

"One of the criteria for an SDR currency is that the currency must be 'freely usable', which requires a certain degree of capital account convertibility," said Zhou.

"Over the last two decades, China has been making steady progress toward achieving this goal."

A second factor is value. The yuan may now be fairly valued by market standards.

A fair value for the currency spills into the third factor - the increasing popularity of the yuan to settle trades and do business around the world. The yuan currently is the fifth most-used currency for global settlements, and its use in global trade is growing rapidly.

And yet the yuan accounts for just 2.03 percent of payments around the world, according to the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, which manages international payments.

The dollar is used in 44.6 percent of all payments and the euro in 28.3 percent. The yuan is, however, within striking distance of the yen, used in 2.7 percent of all global payments.

A fourth factor is the increasing use of the yuan in financial transactions, which stems from the use of the currency in trade settlement. The growing number of offshore yuan settlement centers around the world makes this possible.

Yuan-denominated bonds now add up to about 740 billion yuan in both dim sum bonds and Formosa bonds, or yuan-denominated bonds sold in Taiwan. As much as $30 billion a day in turnover means that yuan-denominated bonds are increasingly competitive with other currencies.

Shaun Roache, the IMF's resident representative in Hong Kong, says the internationalization of the yuan has been happening very quickly, and the pace of change has been enormous.

"There should be some caution in the way the capital account is opened ... the Chinese authorities have been cautious," he says.

China started moving toward "gradually making the RMB a convertible currency" in 1993, said the PBOC's Zhou. The Asian financial crisis toward the end of that decade delayed the process until 2003. Since then, the progress has been quite rapid, Zhou added.

The yuan is now "largely convertible" for foreign direct investment and outward investment and there are investment programs for both foreign and domestic investments.

The global financial crisis in 2008 slowed down the process anew, but since 2011 the internationalization of the yuan has picked up speed again.

More reforms are happening this year, including the creation of more channels for individual investors and a Shenzhen-Hong Kong Stock Connect program to complement the Shanghai-Hong Kong initiative launched last year.

The "capital account convertibility" that China is seeking has changed since the global financial crisis, and managed convertibility is now an option, said Zhou.

"At present, there are only a few capital account items that are completely inconvertible."

This is good news for China's Asian partners like South Korea. Through 2014, says intelligence firm Mergermarket, Chinese investment in the country almost quadrupled from a year earlier to some 4 billion yuan.

For China Daily Asia Weekly