A system to settle cross-border yuan payments and boost the convertibility of the currency will be set up, central bank officials said on Wednesday.

The move will promote the international use of the yuan, analysts said.

The China International Payment System will be established in one or two years. It will make yuan clearance safer and more efficient for cross-border trade and investment settled in the currency, said Li Bo, head of the central bank's second monetary policy department, at a news briefing in Beijing.

The system will help gradually make the currency convertible and will facilitate wider use of the yuan in cross-border settlements, Li said.

Currently cross-border yuan clearance is conducted through the Hong Kong and Macao branches of Bank of China, or agency banks of overseas participants.

While demand for cross-border renminbi settlement is increasing, transaction costs in the current payment system are higher than those conducted in other major currencies, such as the US dollar, analysts said.

"The new system will link domestic and overseas participants directly, and support different languages including Chinese and English. What's more, the working hours will be extended to 17 or 18 from the current eight to nine hours to cover yuan settlement demand from different time zones," said Li Yue, director of the payment and settlement department at the People's Bank of China.

"The rising international use of the renminbi is one of the most exciting developments in global trade and finance," said Stuart Fraser, chairman of the policy and resources committee at the City of London corporation.

"Any measures which can help facilitate cross-border transactions and increase efficiency and security are a very welcome development," Fraser said.

A more efficient and safe cross-border payment system is critical to ensure that the huge number of transactions are made with minimal delays, said Ma Jun, chief economist for Greater China at Deutsche Bank.

The system will provide more specialized cross-border payments and clearing services for offshore banks and will operate in daylight hours for most time zones, he said.

"If well designed, the percentage of cross-border transactions that do not require manual intervention can also be substantially enhanced, saving time and costs for clients."

Under the new system, most smaller foreign banks will use member banks as a correspondent bank, Ma said.

Li said that the system will adopt global standards, and probably use the international messaging service, the Society for Worldwide Interbank Financial Telecommunication, commonly known as SWIFT.A banker based in Hong Kong, who did not want to be identified, said that the move suggests that the pace of yuan internationalization will accelerate in years to come.

International trade settled in yuan exceeded 2 trillion yuan ($317 billion) and foreign direct investment settled in yuan reached 110 billion yuan last year, according to the central bank.

The World Bank earlier said that China's growing role in global trade, the size of its economy and its role as the world's largest creditor mean that the renminbi's internationalization is "inevitable".

But acceptance of the renminbi as a major global reserve currency will depend on the pace and success of financial sector reforms and the opening of China's external capital accounts, it said.

"It is clearly the case that the Chinese authorities are pushing forward with the policy of internationalizing the yuan and its establishment as a global trading and reserve currency," said Andrew Heathcote, partner at international law firm Freshfields Bruckhaus Deringer.

"There are, however, a number of important issues that remain to be addressed before full convertibility can be achieved — such as the liberalization of interest rates," Heathcote said.

"In the near term I think we will continue to see further gradual loosening of the restrictions on the capital account and the continued promotion of the use of the yuan for international trade settlement. Full convertibility and the use of the yuan as a reserve currency is, however, much more of a long-term project," Heathcote said.