SINGAPORE -- The People's Bank of China has designated the Singapore branch of the Industrial and Commercial Bank of China (ICBC) as the yuan-clearing bank in Singapore, it said on Friday.

Singapore is also the first regional financial center outside China to have a yuan clearing bank. In China's Hong Kong and Taiwan, the local units of the Bank of China had been picked to clear yuan transactions in 2004 and 2012, respectively.

The Monetary Authority of Singapore said it welcomes the announcement on Friday, which marks a key milestone in the growing financial cooperation between the two countries.

It "will enable Singapore's financial center to play a useful role in facilitating greater use of the RMB for trade, investment and other economic activities in the region," said Ravi Menon, managing director of the Monetary Authority of Singapore.

The much-anticipated announcement came four months after the local units of the Bank of China and the ICBC were both granted qualifying full bank licenses in Singapore, which allow them to open up to 25 outlets in the city state.

China and Singapore signed exchanges of letters on cooperation in the banking industries in July last year under the framework of the bilateral Free Trade Agreements, agreeing for two Chinese banks to be given qualifying full bank licenses in Singapore and one of them to be designated as a yuan clearing bank later.

Singapore is among the several cities, including London and Luxemburg, to pursue offshore yuan clearing banks.

"Singapore wants a yuan clearing bank firstly because it wants to grow its offshore yuan capital market. With a local yuan clearing bank, it will be more efficient for the transactions to be cleared, and it will be better for the growth of the offshore- yuan capital market and better for its status as a regional offshore yuan hub," said Tommy Xie, economist at the OCBC Bank.

The Singapore Exchange said last year it was prepared for the listing of yuan-denominated securities.

The demand for yuan in cross-border trade settlement and yuan- denominated investment products in Singapore has been strong, and several companies already issued yuan-denominated bonds.

Ong Chong Tee, deputy managing director of the Monetary Authority of Singapore, said at a seminar in June last year that the pool of yuan deposits in Singapore was estimated to be around 60 billion yuan ($9.6 billion).

Statistics on the total amount of yuan-denominated cross-border trade settlement were not available, but the Singapore branch of the Bank of China said it settled over 60 billion yuan of RMB- denominated cross-border trade in 2011, while the Singapore unit of ICBC said it settled close to 50 billion yuan of RMB- denominated cross-border trade. Both banks said the numbers surged by about 50 percent in the first half of 2012.

Xie expects Hong Kong to retain its unique status as the most important offshore yuan center given its status as a special administrative region of China. London has an advantage in terms of its time zone, but Singapore still has a very important role to play as a regional center, especially in terms of trade.

"For China to promote the international use of yuan in cross- border transactions and other transactions, it needs more than one yuan-clearing hub, after all," he said.