"There is still a lot of room for growth in terms of absolute value, considering the fact that offshore yuan liquidity amounts to less than 2 percent of China's M2 money supply," Chow said. In comparison, the share of offshore US dollars is 30 percent of total money stock.

The SWIFT report also noted that the renminbi's ranking as a world payments currency fell two notches from January to 7th position in February with a share of 1.81 percent. Analysts attributed the decline to the long Spring Festival holidays, which disrupted commerce and industry.

"Seasonal factors may have contributed to the decrease of renminbi settlement in February. But another reason could be that the weakening of the yuan has discouraged mainland importers from accepting the currency for settlement of purchases from abroad," Chow said.

He said that the yuan will continue to depreciate, albeit mildly, against the dollar in the next few months because of the impending interest rate hikes in the US and the market perception that the Chinese central bank is happy to maintain the cost of money at current levels in coming months.

Premier Li Keqiang last week urged the International Monetary Fund to include the Chinese currency in the special drawing rights basket, which will make the renminbi the world's fifth reserve currency after the greenback, euro, yen and the British pound.

Li said China will speed up the basic convertibility of the yuan on the capital account to meet the SDR requirement.

Zhou Xiaochuan, governor of the People's Bank of China, said on Sunday that China hopes to work on streamlining regulations governing foreign exchange this year and that through the adoption of new rules China would eventually be able to achieve capital account convertibility.