CANBERRA - Australia and China have agreed to enhance offshore market development of the Renminbi (RMB) and the central banks of both countries are working together on potential future clearing and settlement arrangements in Sydney, Treasurer Joe Hockey said in a press release on Friday.

Once the arrangements are finalised, it will place Sydney alongside Hong Kong, Singapore and Taiwan as an official trading hub for the yuan, the Australian Financial Review reported.

"Australia is at the forefront of countries working with China to support international use of the RMB," Hockey said, " Australian banks and their Chinese counterparts have worked hard to promote direct trading of the two currencies."

Monthly trading volumes have increased more than seven-fold in the past year to 2.4 billion US dollars from 324 million US dollars equivalent before direct trading.

Last April during then Prime Minister Julie Gillard's visit to China, both countries announced a direct exchange between the Aussie dollar and the Renminbi.The Australian dollar has become the fourth most traded currency on China's Foreign Exchange Trading System and "there is significant potential for this market to grow", said the treasurer.

Australian Prime Minister Tony Abbott is now on his first visit to China to promote trade with China, Australia's biggest trading partner.

"China's leaders have sent a strong signal of their commitment to a comprehensive program of economic reform. Financial sector reform will be central to achieving this," Hockey said.

He said these reforms will better integrate China into the global economy by breaking down the walls that prevent the free flow of capital to the rest of the world. It will see China further liberalize its exchange rate and promote the international use of its currency.

"When I travel to China for the Strategic and Economic Dialogue later in the year, I will explore further steps to promote economic and financial cooperation between Australia and China," he said.