In a speech to be delivered today in Hong Kong, the Treasurer says he is due to hold further talks with Hong Kong financial secretary John Tsang this week in a bid to increase yuan investment and trade with Australia.
The negotiations to allow full convertibility between the yuan and the Australian dollar began last year and are part of Beijing's aim for the yuan to become a larger player in trade settlements.
The talks come as figures show that Australian companies sharply increased the use of the yuan for global trade payments late last year, after a period of relatively low volumes, according to the Society for Worldwide Interbank Financial Telecommunication, a global payments system.
"You are at the centre of vital reform pathways like China's gradual transition towards an open capital account and a convertible currency," Mr Swan will tell the Asian Financial Forum.
"Australia strongly supports these efforts, with the internationalisation of the yuan as the first step along the way."
Australia will host its first yuan forum later this year as part of its negotiations and, if achieved, the Australian dollar will sit alongside the US dollar and the Japanese yen as the only fully convertible currencies.
Exporters and importers are likely to be the major beneficiaries if a deal is struck, as trade payments may be settled in local currencies, which will save businesses US dollar hedging costs.
"The greater engagement in the yuan internationalisation was an explicit pathway set out in our white paper," Mr Swan says.
"Since I raised this issue in Hong Kong and China last year, Australia has climbed from 12th to fourth among the rest of the world for use of the yuan for global (trade) payments.
"We are also working with China to establish direct trading between our two currencies on the mainland and we are making great progress."
The prospect of full convertibility gained ground after a $30 billion bilateral currency swap was established in March last year between the Reserve Bank and the People's Bank of China.
China is now Australia's largest trading partner, with exports worth at least $115bn a year.
In the speech, Mr Swan says Australia's banks are now among the highest rated in the world and well positioned to deal with the upcoming Basel III regulations.
A major platform of the regulatory changes was revealed last week, with the proposed tough liquidity ratios watered down and phased in over four years.
"Our banks are well placed to meet the new Basel III requirements -- they are even better capitalised, with more high-quality capital," Mr Swan says.
"They've got longer-term funding profiles and more stable deposits. They are also well funded for a long period and don't have any material exposures to troubled European nations."
