In response to Hong Kong's  increasing efforts to become the offshore center for the Chinese yuan, Shanghai is also taking steps to keep its role as pricing center for yuan-denominated financial products.

"We should develop Shanghai's foreign-exchange market to match expansion of yuan use overseas," Bloomberg reported, citing Zhang Jianhua, director of the research department at the People's Bank of China as saying.

 "We should try to control price setting. Strong growth in an offshore yuan market might influence the currency's onshore price." Zhang said at the conference held by the International Finance Research Institute of Shanghai Finance University.

China should seek to expand convertibility of the yuan, which would help to build Shanghai into a global financial center, Zhang said. The Shanghai market should expand trading of yuan forwards and swaps, and introduce options and swaps at an appropriate time, he added.

Last week, the People's Bank of China (PBOC)  signed a supplementary memorandum of co-operation on the expansion of the renminbi trade-settlement scheme with Kong Kong's Monetary Authority (HKMA).

"Following the revision of the settlement agreement, there will no longer be restrictions on banks in Hong Kong in establishing renminbi accounts for and providing related services to financial institutions; and individuals and corporations will be able to conduct renminbi payments and transfers through the banks,"  said Norman Chan, Chief Executive of HKMA.

After the deal was signed, many yuan-denominated financial products sprang up. The banks also raised the interests for yuan savings, some of which even created capital-guaranteed and structured products which are pegged with rate.

However, some executive from foreign-funded banks in Shanghai said Shanghai is not going to give off the offshore yuan business, according to Ming Bao. The city even reported to China's central authorities to make a pilot project for offshore yuan business in Yangshan.

"in view of current situation and developing level, the pilot project in Yangshan will follow the model of Singapore's New York type," the person in charge of the project told Ming Bao.

Despite the fact that Shanghai hasn't finalized the details of the project and probably will start with dollar business, it will add offshore yuan business in the long run. By now no local officials has denied the report.

As the market become more concerned of the internationalization of yuan will intensify competition between Shanghai and Hong Kong, officials from Shanghai made public statements with Hong Kong officials.

  "With Hong Kong performing as offshore centre and Shanghai onshore center, they will complement each other in contributing the globalization of Renminbi," Shanghai Vice Mayor Tu Guangshao said on July 21st at the high-level Hong Kong SAR Finance Forum in Shanghai .

As an established global financial centre Hong Kong can promote the internationalization of the yuan and the development of the yuan asset market, said John Tsang, Financial Secretary in Hong Kong.

"This process will definitely make the onshore capital market more open."  Tsang said.

With the advantages of international outlook and experience, Hong Kong  will complement Shanghai in "contributing to the economic development of China and the globalization of the Mainland's financial markets.", according to Tsang.

Tsang compared Hong Kong and Shanghaito be "two engines of the same airplane" which "will run together to push forward the internationalization of the renminbi" .