Some experts argue that in addition, the renminbi can't become a global currency to match the dollar until investors feel that the rule of law predominates in China, so that international renminbi creditors can protect themselves by effectively pursuing claims through legal process there. Whether this is a binding condition is uncertain. What is clear is that full renminbi convertibility is necessary for a truly internationalized renminbi.

How long will it be before China achieves full renminbi convertibility? In December 2012, former central bank governor Zhou made an important speech at a conference in Hainan, in which he indicated that currency convertibility was both a goal of the government, and in sight, although a lot of work still had to be done. It appears from more recent comments by Zhou that full renminbi convertibility could come within the next two or three years.

RMB internationalization could transform global markets

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Although a freely traded currency is not the same as full convertibility, we can see that the recent widening of the daily trading band of the renminbi to 2 percent up or down is a further move toward a freely traded Chinese currency. A freely traded, fully convertible renminbi could be with us by 2016 or 2017. It may take a year or two more for China to develop the deep, liquid and transparent renminbi-denominated stock and bond markets which renminbi holders can invest in. The recent announcement linking the Hong Kong and Shanghai stock markets is an important step in this direction.

We can see a time in a few years when China's currency will be seen as a major global currency alongside the US dollar and the euro, and when the comments of China's central bank will be listened to by the global investing community as closely as the comments of the governor of the US Federal Reserve and the European Central Bank are today.

If so, by around 2020, China's global financial influence will have approached that of the US and the EU bloc. The world will have entered a new era of multilateral currencies. The resulting three-legged global currency system will produce a fairer and more stable global economy, and will extend China's impact on existing asset markets, from stocks and bonds to commodities, real estate and precious metals.

This will be of great benefit to China in terms of convenience, the profits to be made from issuing a globally used currency, and the acceleration of economic reform which further financial opening-up will bring to China.

The author is a visiting professor at Guanghua School of Management, Peking University. The views do not necessarily reflect those of China Daily.