Trade between Australia and China just got a little easier.
The Australian dollar is set to become only the third currency to trade directly with the Chinese yuan -- a move that will help internationalize China's currency and smooth transactions between the major trading partners.
Australian Prime Minister Julia Gillard announced the deal Monday during a trip to Shanghai.
"Australia's banks, superannuation funds and financial houses will be even better placed to help in the growth of China's service economy," Gillard said. "This is good news for the Chinese economy and good news for the Australian economy."
Australia now exports more goods to China than any other country, and trade between the countries is growing.
In practical terms, direct convertibility means that Australian businesses operating in China will no longer have to use U.S. dollars to purchase goods. Instead, they will be able to use Australian currency without a conversion, which should lower costs.
The yuan, also called the renminbi, already trades directly with the U.S. dollar and the Japanese yen.
China is pushing to internationalize the yuan, and the currency is being used to conduct a growing number of transactions on international markets as Beijing loosens its grip.
Critics have long accused China of keeping its currency artificially low, making its exports cheaper and more competitive against foreign players.