Australia's stock exchange operator ASX and Bank of China said on Tuesday that they will provide a yuan settlement service to Australian and Chinese financial markets by mid-year, marking the latest step in the yuan's development as a global currency.
China is Australia's biggest trading partner and Australian firms have increasingly been settling their Chinese trade in yuan rather than , according to local media reports.
(Read more: China's bank lending party keeps on rolling)
The new yuan settlement service will allow Australian firms to make trade and investments with China through the ASX, which has a "proven market infrastructure," the ASX said in a statement.
"What today is about is a milestone in the journey Australia and China are taking together," Australia's Assistant Treasurer Arthur Sinodinos told CNBC's Asia Squawk Box.
Chinese authorities have been stepping up efforts to improve the use of the yuan, which remains tightly controlled by Beijing.
In October for instance, China launched a currency swap deal with the euro zone.
(Read more: Yuan moves one step closer to global currency status)
The yuan, also known as the renminbi, is now one of the world's ten most frequently traded currencies, the Bank of International Settlements said last September.
Sinodinos told CNBC that Australia was not perturbed by recent signs that China's economy is losing its momentum.
"Australia takes a long-term view of the China relationship. China is going through a transition. Their transition will lead to consumption-led growth, it will lead to increased demand for a diversified group of products and services," Sinodinos said.
(Read more: Yuan now one of world's most tradable currencies)
"Australia's economy is also going through a transition where we've had growth based on record levels of resource investment. We're diversifying our economy as well and we're well placed to service many of these emerging needs from China," he added.
Australia, Japan and the U.S. are the only countries to allow full convertibility of the yuan, according to media reports.
— Writing by CNBC's Dhara Ranasinghe. Follow her on Twitter at @DharaCNBC