The central banks of Singapore and China are in talks to set the city-state up as a trading hub for the Chinese yuan, a report said Monday.
The move would allow Chinese banks to do more business outside the mainland and also bolster Beijing's aim to promote its currency as an international unit.
Hong Kong is the only city outside mainland China where offshore trading of the yuan, or renminbi, is allowed.
The Wall Street Journal, citing sources familiar with the matter, said the People's Bank of China had been receptive to interest from Singapore to be a market for the buying and selling of the Chinese currency.
It said, however, that a decision on the outcome of the talks was not imminent.
The Monetary Authority of Singapore (MAS) did not comment directly on the report when contacted by AFP, but said the city-state "is well positioned to facilitate trade-linked business flows with mainland China".
The People's Bank of China did not respond immediately to questions faxed by AFP.
A greenlight from China will boost Singapore's status as one of the top financial hubs in Asia alongside Hong Kong and Tokyo. The city-state is the second largest forex trading centre in Asia after Japan.
Top leaders in Beijing want to see the yuan adopted as a global reserve currency to reflect China's growing economic and political clout.
Allowing the yuan to be used more widely overseas also helps China reduce the amount of dollars flowing into the country, which is adding to its already world-beating foreign exchange stockpile and fanning inflation.
Last year, the MAS signed a three-year currency swap agreement with China that allows the city-state to tap up to 150 billion yuan ($23 billion) in liquidity from its Chinese counterpart.
In addition, banks such as HSBC, Singapore's DBS Bank and the Industrial and Commercial Bank of China currently offer yuan banking services in Singapore.