China is New Zealand's largest export destination and a major buyer of dairy products produced in the South Pacific nation. The move was seen as promoting trade between the two countries, which rose 25.2 percent to NZ$18.2 billion ($15.71 billion) in 2013, and increase capital flows.
"Today's announcement will further reduce the costs of trade and investment transactions between New Zealand and China, increasing the ease of doing business for the benefit of business people in both countries," New Zealand Prime Minister John Key said in a statement.
As part of China's sweeping plans to overhaul its maturing economy and let market forces drive a host of industries, the government wants to gradually relax its hold over the yuan and turn it into a global reserve currency that one day rivals the dollar.
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The government's wish to promote international use of the yuan is partly driven by its concern that China is too vulnerable to the fluctuating value of the dollar.
China is home to the world's largest foreign exchange reserves, worth $3.82 trillion at the end of last year. About a third is invested in U.S. government bonds.