Before we begin this week's column, Asia Briefing needs to deliver a little lesson about what to call the Chinese currency.

“Renminbi” means “the people’s currency” and it is the name given to the money used in China after the revolution in 1949 that brought the Communist Party to power.

“Yuan” is what one unit of the currency is called. Forex people tend to talk about RMB, and the closest analogy is with pound sterling – you would say 10 pounds but not say 10 sterling.

To confuse things further, in China, people generally refer to the price of things using the word “kuai” which means piece. A bit like “quid”.

In this article, as it’s about specific currency issues, we use yuan, RMB and renminbi interchangeably to mean the Chinese currency.

For so long, China has been seen as the world’s factory, but increasingly it is trying to position itself as the world’s bank. Major economies such as Russia are keen to see the world’s second-largest economy speed up the internationalisation of the yuan and become the world’s biggest reserve currency.

China has gradually eased restrictions on the yuan as part of broader economic reforms, and a number of its major trading partner countries have started
to include the yuan in their official reserves and open currency swap agreements.

By the end of 2013, the yuan had risen to become the second-most-used trade financing currency and ninth-most-used currency for payments globally.

China’s central bank, the People’s Bank of China, doubled its daily trading band in mid-March. The yuan even briefly dislodged the Swiss franc as the world’s seventh most used global payments currency earlier this year.

To bring this about, China has expanded the role of the currency in cross-border trade settlement, developed offshore renminbi centres and encouraged wider use of the yuan in cross-border investment.

At the same time, it has made market interventions to slow the pace of appreciation of the yuan, a sign that it remains cautious, even wary, of currency liberalisation.

In a recent report, HSBC said it believes full renminbi convertibility may come earlier than many expect, in the next two or three years. It said the currency's usage in cross-border trade and investment is accelerating, paving the way for the renminbi to join the greenback and the euro as a reserve currency.

Alan Duffy, managing director and head of Ireland at HSBC Corporate Bank, pointed out how his bank had been involved in five major transactions for Irish corporates in China in just the first quarter of 2014.

He believes the rapid growth in the usage of renminbi for trade settlements and the forecast for full convertibility earlier than many had expected has clear implications for Irish businesses, as their China-based trade partners may increasingly look for settlement in the yuan.

“It is clearly a growing market, especially for our agri-foods and agri-nutritionals sectors. In fact, while the latest HSBC trade forecast shows that the US and Britain are expected to remain the most important export destinations for Ireland over the next 25 years, other key mature markets such as France and Japan will gradually be edged out as China moves to become Ireland’s 4th largest trading partner by 2030,” said Duffy.

“Having an awareness of developments vis-a-vis the renminbi will naturally prove beneficial and could potentially provide first mover advantage,” said Duffy.

“The ability to access an importer base that may otherwise have limited access to FX is an opportunity. Exporters can hedge their FX exposure in the offshore RMB market and invest surplus liquidity in a wide range of investment products offshore.”

A significant number of HSBC’s European-based clients, especially in Germany, Poland and France, are actively settling in renminbi and monitoring the currency’s movements to ensure they are optimally hedged.

Among the benefits, HSBC’s 2013 International RMB survey found that 53 per cent of Chinese businesses would offer discounts of up to 5 per cent for transactions settled in the Chinese currency because it can assist Chinese importers improve their working capital.

“Utilising the RMB also sends a very strong, culturally positive message which cannot be underestimated in building trust between suppliers and buyers, “ said Duffy, who added that he could also see clear wider benefits for the Irish economy “as China having a global currency can only open the region up further to any Irish company looking to this growing market”.

For the record, the HSBC report is called The Rise of the Redback , so perhaps we'll have to add this to the list of names for the Chinese currency soon.