China on Wednesday allowed its currency to be directly traded with the New Zealand dollar in another step toward allowing greater international use of the yuan.
New Zealand Prime Minister John Key announced the start of trading during a trip to China.
Previously, a company that needed to trade New Zealand dollars for Chinese yuan in China had to use a third currency, typically the U.S. dollar.
New Zealand allows open trading of its currency. China has strict capital controls which allow it to control the value of the yuan, an important economic and political tool in a developing country where tens of millions of jobs are tied to exporting.
China's government is gradually expanding opportunities for the yuan to be used outside its borders for trade and investment. It has previously allowed only five currencies to be directly traded with the yuan: the U.S. dollar, the Japanese yen, the Australian dollar, the Russian ruble and the Malaysian ringgit.
China is New Zealand's largest export market. New Zealand in 2008 became the first developed nation to sign a free trade agreement with China.
Key said the move will make it easier for New Zealanders to do business in China and will stimulate trade and investment.