Five major Chinese cities were approved to use the yuan in oversea trade settlements, a move deemed as a step forward towards the renminbi becoming a global currency.

Shanghai together with four cities in Pearl River Delta - Guangzhou, Shenzhen, Dongguan and Zhuhai - were allow to use the yuan overseas trade transactions which will reduce the risk from exchange rate fluctuation and boost declining overseas trade, according to a statement on state council website.

China currently use the US dollar as the major currency to settle international trades, but the dramatic depreciation of the greenback has threatened the Chinese export industry amid the global economic downturn.