Yuan activities are accelerating across European financial centers including London, Paris and Luxembourg, signaling a big step forward in the internationalization of the currency and Europe's crucial role in supporting this process.

Following the UK-China Economic and Financial Dialogue on Sept 12, the UK government announced that it will issue the first sovereign renminbi bond outside China, worth 2 billion yuan ($325 million).

Industrial and Commercial Bank of China Ltd has received a branch license for wholesale operations in the United Kingdom, becoming the first Chinese bank to do so after recent regulatory changes. The changes resulted from intense lobbying by Chinese banks in recent years, given that previously foreign banks were only allowed subsidiaries in London.

In Paris and Luxembourg, Bank of China Ltd and ICBC were appointed as yuan clearing banks this month. This follows the appointment of clearing banks in London and Frankfurt in June.

An official clearing bank facilitates the efficient clearing of offshore renminbi transactions, achieved through the appointed bank's direct collaboration with the People's Bank of China.

"Most of the recent announcements have related to Europe, and clearly this increases the role and so importance of Europe in the international use of the renminbi," says Andrew Carmichael, a partner at Linklaters law firm in London.

This is partly due to Europe's position as the largest international trading bloc in the world, with highly developed financial centers, whereas the focus in the United States would always be the dollar, he says.

Carmichael says the spread of renminbi activities across Europe shows a continuation of the Chinese government's strategy of developing multiple offshore renminbi hubs, which he says will continue to internationalize the currency while maintaining choice and competition.

Each center will contribute to renminbi internationalization using their respective strengths. For example, Luxembourg may focus on fund management and listings of renminbi bonds, while London's advantage may be in underwriting and foreign exchange, Carmichael says.

China's push to internationalize its currency started in 2008, when the global financial crisis demonstrated the danger of overreliance on the US dollar.

During the G20 summit in November 2008, then president Hu Jintao called for "a new international financial order that is fair, just, inclusive and orderly".

Beijing soon began to encourage the use of its currency in international trade, swap arrangements among central banks, and bank deposits and bond issuances in Hong Kong.