TAIPEI ( TheStreet) -- This month China again expanded offshore trading of the tightly controlled but highly coveted yuan currency. The latest target, Taiwan.
Officials in Beijing had already done the same for Hong Kong. As a result, the Asian financial hub handled trade worth 1.915 trillion yuan ($307 billion) of a total 2.081 trillion yuan in transactions made outside the mainland in 2011.
Taiwan has a ways to go before reaching Hong Kong levels, though Asian currency analysts say it has the right hardware in place. Yet, I'm about to bet some forex here that for most of the world it's not that big of a deal.
The island that once flirted with the idea of war with China won the currency settlement deal because five years ago it dropped its tough stance that had killed prospects of any deal with the huge, ever-harder-to-ignore Chinese economy.
China still claims self-ruled Taiwan as part of its turf, but the two sides have quit mentioning it. Beijing hopes the currency agreement, among others that help Taiwan's economy, will make formal unification attractive to a largely leery public.
But it was already too late to stand out. Taiwan will vie for offshore investors with Malaysia, where 11 financial institutions have signed up to allow trade settlements and electronic yuan fund transfers. Then comes the famously liquid financial center Singapore. The city-state in Southeast Asia said last year China was planning to pick a local bank to clear yuan settlements. Even London is working on a yuan scheme.
Not all that many years ago, the yuan was all but non-negotiable outside mainland China. You had to get yuan in the country. One you had it there, you spent it there.
Beijing's goal is to reward other regions for being friends of China or to inspire more support. As in Taiwan, people in Hong Kong remain squeamish about allying too closely with Beijing despite its huge economy and common ethnic heritage.
The world's second-largest economy is also promoting offshore settlement centers to extend the use of renminbi in global trade. What better for nationalism than to have other currencies converted to yuan instead of U.S. dollars on millions of documents?