The government will expand a pilot project allowing importers and exporters across the country to settle trade transactions in renminbi this year, the central bank said Wednesday, a move aimed at boosting the currency's role in global financial markets.

The plan underlines Beijing's effort to internationalize its currency, but major hurdles such as the difficulty still exist.

Economists said Thursday overseas investors must be convinced of the benefits of using renminbi and the ineffective channels through which renminbi flows back to China need to be cleared up before the plan materializes.

"Cross-market renminbi business will develop further as the market's demand for cross-border use of renminbi rises,"the People's Bank of China said in a statement published on its website Wednesday.

To relax its hold over yuan in cross-border trade transactions, China will allow more Chinese and foreign companies to settle trade deals in reminbi, the People's Bank of China statement said.

The central bank will also respond actively to any demands from foreign central banks to use the yuan as a reserve currency, experiment with a program for overseas investment using renminbi and research the possibility of allowing foreign direct investment in China using renminbi.

China expanded a pilot scheme in June to allow importers and exporters in 20 provinces to settle international trade deals in renminbi, covering more than 67,000 mainland exporters, up from just 365 exporters previously.

The experiment proved successful with total cross-border renminbi settlements hitting 506.3 billion yuan ($77.02 billion) last year. Economists at HSBC expect that at least half of China's trade flow with emerging markets countries could be settled in renminbi within three to five years, from less than 3 per cent currently, the Financial Times reported.

China will also increase the number of channels through which renminbi can flow back to China by allowing more foreign banks to buy bonds in China's inter-bank market, according to the statement.

In response to China's easing controls on its currency, global banks including Citigroup and Deutsche Bank will offer renminbi settlement products.

China approved five foreign banks including HSBC and Standard Chartered to trade in the Chinese bond market within a quota of 29.2 billion yuan ($4.44 billion).

China will also seek bilateral currency swap deals to encourage the use of the yuan in bilateral trade and investment, the central bank said. It has inked eight bilateral currency deals, worth a total of 803.5 billion yuan ($122.24 billion), since the end of 2009. Zhong Wei, director of the Financial Research Center at Beijing Normal University, said there are challenges that might mar China's ambition to internationalize its currency.

"The role of the US dollar as an international currency can still hardly be challenged and it is hard to convince foreign companies of the benefit to use renminbi in international trade,"he said.