China has taken steps to extend the reach of the yuan into Europe with a partnership announced Monday between Britain and Hong Kong to turn London into a major offshore center of trade for its currency.

George Osborne, chancellor of the Exchequer or finance minister, said Britain and Hong Kong had agreed to launch a joint private sector forum to enhance cooperation and support China's bid to develop the offshore market for the yuan.

Osborne said the intention was to establish London as "a new hub" for the yuan, also known as the renminbi (RMB), to compliment Hong Kong.

"It's clear that there is scope for the substantial expansion of the RMB market in the coming years," he told the Asian Financial Forum in the southern Chinese banking center.

"I think London is perfectly placed to act as a gateway for Asian investment and banking to Europe and as a bridge to the United States."

Hong Kong Chief Executive Donald Tsang, who heads the semi-autonomous island's government, said a new private sector-led group would focus on expanding settlement systems, market liquidity and the development of renminbi financial products.

It's believed China is looking to push the yuan as a second world currency after the US dollar. A key step in this development was taken in late December when China and Japan - the world's second and third largest economies, respectively - agreed to conduct future bilateral trade directly in the Chinese currency.

Author: Darren Mara (AFP, AP)

Editor: Sarah Berning