China may soon allow its currency to trade directly with the Australian dollar, according to officials from the central bank and a top government think tank.

 

The official at the People's Bank of China, who did not want to be identified, said moves were afoot to allow direct trade settlement between Australia and China, rather than through the US dollar, lowering transaction costs. He said the possibility was under discussion at the Boao Forum, on Hainan, but refused to provide a time frame.

There has been speculation that direct offshore trade settlement is high on Australian Prime Minister Julia Gillard's agenda on her current trip to China.

Zhang Ming, a deputy director of the Department of International Finance at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, said the two governments might move in that direction "quite soon".