By the end of 2012, 20-25% of China’s trade will be denominated in renminbi (Rmb), ANZ head of offshore RMB services and sales, Steve Kelly told corporates and GTR at an ANZ seminar in mid October.

While 7% of China’s trade was denominated in Rmb in the first quarter of 2011, Kelly predicts at least a 5% increase by year-end.

ANZ also calculates that China’s growth, which is largely driven by domestic demand, contributed close to one third of global growth since the financial crisis.

This year, growth is likely to exceed the one third contribution against a backdrop of a sharp downward revision of the growth in the US and EU.

This, coupled with the depreciation of the US dollar, puts Chinese Rmb in a strong position to become one of the world’s reserve currencies, ANZ believes.

Looking ahead, Kelly explains that for ANZ, Rmb settlement will not be limited to the emerging markets and instead aims to trade worldwide, something he believes will happen through a “natural evolution of the marketplace”.

He adds: “ANZ is looking at the future of Rmb from a global perspective and we estimate that at least half of China’s future trade will be settled in Rmb by the end of 2014.”

As a testament to this, the volume of ANZ customers using Rmb services has increased 10-fold over the past year in the number of transactions per month.

The most proactive customers are the SMEs, Kelly confirms. “The SMEs are getting on board with what is happening; the major corporates however are taking more time as they structure their measures and think strategically about this significant change.”

In terms of countries, the top players in the Rmb market are naturally Asia, New Zealand and Australia, Kelly says, with Europe and the US lagging slightly behind.

Other factors that support the growth of the Chinese Rmb is the cultural shift in China itself and how quickly it has adapted to new banking methods.

With China already using Rmb to settle trade between China and Hong Kong, it marks the important first step to internationalise Rmb and boost it as a settlement currency in international trade.

In 2010, 30% of China’s external trade was intermediated through Hong Kong, and nearly 60% of China’s inward and outward direct investment were originated from or directed to Hong Kong.

“The progression in just one year has been incredible, six months ago the market was disbelieving, three months ago it was starting to happen, and now we’re there,” Kelly tells GTR.