If the internationalisation of the renminbi and subsequent capital account liberalisation in China becomes a reality, then a major reshaping of global capital flows and the international financial system is likely, said Philip Lowe, deputy governor of the RBA.Lowe, speaking at a meeting of the RMB Internationalisation Roundtable in Sydney yesterday, went on to observe that less than one per cent of Australia's merchandise trade with China was invoiced in RMB. "For China, around 12 per cent of total merchandise trade in 2013 was invoiced in RMB, although we estimate the number was around three to five per cent if trade with Hong Kong is excluded," Lowe said. "These figures suggest that there remains significant potential for growth in RMB trade invoicing, not only by Australian firms, but by firms in other countries as well."While more transactions helps deepen financial markets, and deeper financial markets make trade easier to liberalise, the main variable is the pace of reform by the Chinese authorities, along with the speed with which the financial sector is able to respond to any new opportunities.Lowe outlined the work the RBA has done recently to "create a constructive environment" for decisions to be made. This has included: 1.    Seeking to understand the nature of the existing arrangements and products; any impediments to the development of an RMB market in Australia; and how the RMB market sits within the broader financial system by tapping the expertise of the Bank's representative office in Beijing and allowing RBA staff to make "frequent trips" to China. 2.    Investing around three per cent of Australia's net foreign currency reserves in RMB, to reflect the growing importance of China in the global economy and the broadening financial relationship between Australia and China.3.    Signing a bilateral local currency swap agreement with the People's Bank of China in 2012 which allows the two central banks to exchange their local currencies for "mutually agreed purposes", such as ensuring RMB liquidity through a 'backstop' channel in the event of a disruption to the market. 4.    Working with the PBC on future RMB clearing and settlement arrangements, in particular the establishment of an 'official RMB clearing bank' in Australia "over the coming months", along the lines of other jurisdictions - including London, Frankfurt, Paris, Luxembourg and Seoul - to improve the efficiency of cross-border RMB transactions by, for example, reducing payment delays and transaction costs. 5.    Working to have Australian-based financial institutions granted quotas to invest in mainland China under the Renminbi Qualified Foreign Institutional Investors, allowing them to invest in selected mainland Chinese bonds and equities using RMB obtained in the offshore market. "Ultimately, in order for the RMB market in Australia to flourish, Australian corporates must be able to identify a clear business case for paying, receiving, lending, borrowing and investing in RMB," Lowe observed.