Policymakers and regulators need to address a number of constraints if Australia is to develop as a competitive offshore renminbi centre.A new report on the internationalisation of the RMB, co-authored by Kathleen Walsh, associate professor of finance at the Australian National University, and Geoff Weir, director of consultancy Financial Sector Services, makes a number of recommendations, including changes to APRA's capital requirements with respect to equity investments in joint ventures.'Renminbi Internationalisation and the Evolution of Offshore RMB Centres' arrives with a coda: 'Opportunities for Sydney,' a bit of a signal on the funders of this work.Weir and Walsh said the issue of adequate intraday liquidity needed to be addressed, as well as the provision of reliable market data, initiatives to create awareness in Australia and China, and the development of suitable investment vehicle for the Chinese investment market.Australia's emergence as an offshore RMB centre started in February last year, when the Australian Securities Exchange announced it would establish an RMB settlement service in partnership with Bank of China.This meant that counterparties would be able to use RMB as a settlement currency for trade deals and other foreign exchange transactions. The settlement service was launched in July last year. In November last year the People's Bank of China appointed Bank of China as the official RMB clearing bank in Australia and the ASX signed a heads of agreement with Bank of China to expand their strategic co-operation to develop the renminbi as a currency in Australian financial markets.The appointment of an official clearing bank provides a direct link to China's central bank and access to China's real-time gross settlement system.The system is evolving slowly, with only about one per cent of Australian trade with China settled in RMB.While these are positive steps, Weir and Walsh point out that there are 19 offshore financial centres with official RMB clearing banks and the number continues to grow.Australia is well placed to capitalise on the opportunity, given the complementarities in the structure of the Chinese and Australian economies. Australia is a capital importer, while China is emerging as a major capital exporter. China is Australia's largest trading partner."And China has substantial and rapidly growing savings pool that needs to be invested in offshore assets, while Australia has a large, efficient and sophisticated funds management industry," Weir and Walsh said.However, competition in offshore RMB activity is growing. Weir and Walsh believe "activity will gravitate to those centres where there is liquidity and to centres that have effectively found areas in which to specialise."They argue that Australia must remove several constraints if it is take advantage of the opportunity.  "One constraint on banking services is the treatment of capital investments under Australia's capital adequacy rules, which makes them very expensive to many other countries with which Australia is competing," they said."APRA's capital requirements with respect to equity investments in joint ventures have a substantial impact on their competitiveness relative to competitors from other countries."Australian banks and insurance companies need to be able to compete on a