China's central bank has clarified details for conducting cross-border renminbi business in the China (Shanghai) Pilot Free Trade Zone.

The circular from the People's Bank of China Shanghai Head Office is a significant step forward in the yuan's globalization and the development of Shanghai as an international financial hub, said Tu Guangshao, deputy mayor of the city.

Details of the operating rules, sent to banks on Thursday, are in line with the Opinions on the Developments of the China (Shanghai) Pilot Free Trade Zone, which were released in December.

Banks in Shanghai may conduct cross-border yuan-denominated settlements under the current account and for direct investment as long as they comply with the "know your client", "know your business" and "due diligence" rules, the circular said.

Lenders may decide to arrange such transactions for clients without seeking specific regulatory approval.

The China Foreign Exchange Trading System and National Interbank Funding Center, operated by the PBOC, will provide services for yuan-denominated financial asset transactions to investors in the FTZ and offshore markets, the circular said.

"The PBOC will also support the Shanghai Gold Exchange in providing cross-border renminbi transactions within the free trade zone," the circular said.

Since China launched the FTZ in September, policymakers and regulators have introduced policies to boost international trade and financial services within the pilot zone.

China's yuan overtook the euro to become the world's second-most widely used currency in global trade finance in December, according to the Society for Worldwide Interbank Financial Telecommunication.

Analysts said the opening-up of China's financial sector and the broader international profile of the yuan has increased the use of the currency.

"Expansion of the international use of the renminbi within the zone will significantly enhance the efficiency of the utilization of funds and boost cooperation between lenders and enterprises," said Dai Haibo, deputy director of the FTZ's administrative committee.

"Commodity trading, which is mostly handled by institutional investors, will generate much larger transaction volumes than cross-border yuan payment services," Chen said.

He said that similar policies for a wider range of commodities such as oil and other metals were in the pipeline. The futures market in the FTZ may also offer yuan-denominated settlements.

In November, the FTZ welcomed its largest financial company so far in terms of registered capital - the Shanghai International Energy Trade Center, with capital of 5 billion yuan ($820 million).

The organization is expected to be China's first foray into trading crude oil futures.

These efforts are intended to give China a larger voice in the pricing of global commodities. China's role in setting such prices doesn't yet match its massive demand for these products, Chen said.