Deutsche Bank AG expects the offshore yuan market to maintain rapid growth next year, but has called on the central government to inject more liquidity to ensure the continuous expansion of the yuan's global use.

In a report released on Monday, the lender said 2013 will be very much about dealing with offshore yuan liquidity supply concerns through further capital account liberalization, and said it anticipates a range of "exciting" policies and market developments ahead.

It forecast that the yuan will appreciate against the US dollar by around 2 to 3 percent next year, and yuan-denominated cross-border trade settlement will increase by around 30 percent to 4 trillion yuan ($634.9 billion), or approximately 15 percent of China's global trade value.

The offshore yuan market continued to see stable but solid growth in 2012, and yuan cross-border settlements ― including trade and investment settlements ― are expected to grow 45 percent year-on-year in 2012.

"Policymakers will concentrate on dealing with offshore liquidity supply concerns by further liberalizing capital accounts," said Linan Liu, a rates strategist at Deutsche Bank Greater China.

The bank expects the daily aggregate offshore yuan trading volume to rise to $2.5 to $3 billion, and the total offshore deposit base is forecast to reach 1.25 trillion yuan by the end of 2013.

It expects an official announcement in 2013 on increasing the yuan-denominated qualified foreign institutional investors quota from 70 billion yuan to 270 billion yuan, the establishment of yuan clearing banks in Taiwan, Singapore and possibly London, and yuan fixed-income trading and other yuan business becoming operational in Taiwan in the near future.

"The biggest challenge to offshore yuan market next year lies in the stagnant growth of yuan liquidity in the offshore market. As financing cost in Hong Kong gets closer to that of the mainland, it's becoming more difficult to maintain a considerable capital pool for offshore yuan business," Liu said.

She said offshore liquidity has previously mainly depended on trade settlement in yuan, but as yuan-denominated foreign direct investment in the mainland increases and trade growth slows, the growth of offshore yuan pool is slowing down.

The introduction of the pilot program to allow yuan cross-border lending by onshore multinational corporations will help replenish the offshore yuan liquidity pool and is a critical channel in the offshore-onshore yuan circulation mechanism, she said.

Recent capital inflows into Hong Kong could also help lower financing costs in the offshore market, according to Liu.

"For example, since US adopted its third round of quantitative easing policy, the one-year funding cost fell to 2.89 percent from the previous 3.05 percent."

Apart from the market liquidity, China's economic growth, yuan appreciation and financial reform would all pose impact on the offshore market next year, and may lead to a 20 percent slowdown of the offshore yuan business in worst scenario, she said.

And without capital account liberalization, yuan internationalization can only realize 10 percent of its full potential, according to Liu.

"This year trade settlement in yuan can no longer propel growth of the offshore market as much as previously, if China doesn't open up capital account, development of the offshore market will be stagnant."

Global use of the yuan in trade settlement has moderated as shown by the first update to an index reading the currency's globalization, Standard Chartered Bank said in a news release on Monday.

The Standard Chartered Renminbi Globalization Index declined slightly to 732 in October from 735 in September.

"The pause in the general uptrend was partly due to the slowdown in yuan-denominated trade settlement, which had been a major contributor to the increase in the index in recent months," said Kelvin Lau, an economist at Standard Chartered.