China is likely to support Australia's development as one of the world's renminbi hubs, according to new research on the internationalisation of the RMB.The Centre for International Finance and Regulation, which is run by a consortium of universities, has forecast the potential for massive increases in trade-related and portfolio investment flows into and out of China over coming decades as well as increases in associated provision of RMB denominated financial products and services for trade and other financing, risk management and investment.And it reckons Australia has a role to play.The publication of the CIFR research yesterday coincided with a conference it hosted on the internationalisation of the RMB.Speaking at the conference, Reserve Bank deputy governor Philip Lowe agreed that a change in the structure of Chinese capital flows could have significant implications for Australia's capital and asset markets. "Increased demand for hedging products and other financial instruments could open up new opportunities for our financial institutions," Lowe said.According to CIFR's research, internationalisation of the RMB has been focused until now on trade invoicing and settlement. Between June 2010 and March last year, RMB-denominated trade settlements have grown to 16 per cent of China's total foreign trade.The CIFR paper said: "A currency is internationalised when market participants use it to trade, to invest, to borrow and to invoice outside the currency's home country. Such activity should involve residents and non-residents of the home country."The RMB's use (leaving Hong Kong to one side) as a store of value has been limited. This is because of constraints imposed by China's capital account exchange controls.CIFR said: "For a currency to become internationalised there needs to be a wide array of easily accessed and highly liquid investment products available offshore that are denominated in that currency. The limited availability of and access to RMB-denominated investment products outside China and Hong Kong makes potential investors in RMB-denominated assets less willing to hold the currency."It said things were changing, however. Since 2003 Hong Kong residents have been able to buy limited amounts of RMB on a daily basis, with the limits increasing over time.Since 2007 the sale of RMB-denominated bonds (so-called dim sum bonds) has been permitted in Hong Kong and has been a growing market.Access to China's equity market has been allowed in limited (but increasing) quotas. "Hong Kong may be seen as the next stage of RMB internationalisation beyond a medium of exchange to an offshore store of value," the paper said."A similar approach will be necessary with respect to other overseas markets should China choose to continue down the path of RMB internationalisation."It said the process had already begun, with developments in Singapore, the City of London and Paris.When it comes to Australia, in February the Australian Securities Exchange launched an RMB settlement service in partnership with Bank of China. The partners expect to have the service in operation by the middle of the year. Counterparties will be able to use RMB as a settlement currency for trade deals, foreign exchange transactions and investments.