By Michelle Chen HONG KONG, March 13 (Reuters) - As the competition to become the leading offshore yuan centre in Europe intensifies among candidates such as London, Luxembourg and Frankfurt, the quiet growth of yuan business in the Americas may have caught many by surprise.
With its well-established financial infrastructure and unique time zone, New York's yuan market share is increasing as more companies have started to adopt the yuan to settle trade transactions and capitalise on yuan products to hedge FX risk.
The United States was ranked fourth (excluding China and Hong Kong) in terms of customer initiated and institutional payments denominated in yuan in January, up from sixth a year earlier, according to global transaction services organisation SWIFT.
The United States has an offshore yuan market share of 7.3 percent, following the UK at 25.7 percent, Singapore at 25.2 percent and Taiwan at 9 percent.
"New York's growth as an offshore renminbi centre has been relatively organic, largely based on local needs for settlement of renminbi-denominated trades in the Americas time zone," said Kelvin Lau, an analyst at Standard Chartered Bank.
The bank recently included New York in its renminbi globalisation index after it did a roadshow in the city, finding that the Chinese currency was seen by local investors as the key investment opportunity in Asia ex-Japan.
Companies there increasingly make use of the yuan in trade settlements, not only because they are able to enjoy attractive discounts offered by Chinese counterparts, but also a faster process to get the transations done, bankers say.
The United States is China's biggest trading partner.
In 2013, China's exports to and imports from the U.S. stood at $521 billion, accounting for 12.5 percent of China's total trade, statistics from the General Administration of Customs of China showed.
The huge trade volume means even if a small percentage of the total is redenominated in the redback, the absolute figure is likely to be considerable. Along with this, companies make more use of yuan derivatives to manage their FX exposure.
However, China's trade surplus with the United States may make growth in yuan deposits in the country difficult, which is different than the situation in Taiwan, where yuan deposits have risen quickly thanks to heavy trade volumes as well as China's trade deficit with the island.
The obstacles to challenge the dollar's dominant global position may also prove especially big in the United States and any further yuan penetration into the world's largest economy will take time.