NEW YORK ( TheStreet) - One of the fundamental characteristics of the global financial architecture is that the world's second largest economy maintains a rigidly controlled currency.

The concept of currency wars, as initially articulated last year, seemed to have been a criticism of the easy monetary policy of the Federal Reserve, but is being appropriated and used as a criticism of the lack of flexibility of the Chinese yuan.

The reluctance of Chinese officials to allow its currency to be another shock absorber in the circuit of capital means that other liquid flexible or floating currencies have to shoulder a greater burden of the adjustment. Some, like a well respected analyst at a recent industry conference in New York, suggest that as long as Asian currencies remain under-valued that the European currencies will remain over-valued, and by implication other currencies as well.

Given the tightly controlled yuan market, the extent of its use offshore is a development that is capturing the imagination of many observers and participants.

Entities like the World Bank's International Financial Corp, the Asian Development Bank, McDonalds ( MCD), Caterpillar ( CAT) and some of the largest banks in the world have issued yuan-denominated bonds in recent months. Billions of dollars in trade is being settled in yuan.

China has also arranged swap lines with a number of countries, mostly in the region, but as far reaching as Argentina. To date, only Hong Kong appears to have utilized them. As such, the amount of yuan on deposit outside China is growing rapidly. Some observers suggest that this is the beginning of the Chinese yuan becoming a truly global currency and a rival to the privileged place of the U.S. dollar.

Hong Kong

There is both less and more than meets the eye in terms of the internationalization of the yuan. The internationalization of the yuan is less than it may seem because it has been largely confined to Hong Kong -- a special administrative region of China. Yet, at the same time, it reveals the savvy financial prowess of the Chinese government and is pregnant with vast potential. At the very least, China has found a way to profit from the speculative interest in the yuan, betting as it were, on its appreciation.