China and Germany on Friday signed a memorandum of understating (MoU) on establishing an RMB clearing and settlement mechanism in Frankfurt, moving the German city closer to becoming an offshore RMB center.

The document was inked here by China's central bank, or the People's Bank of China, and its German counterpart, the Deutsche Bundesbank, in the presence of visiting Chinese President Xi Jinping and German Chancellor Angela Merkel.

The German side "welcomes RMB to play a bigger role in the international financial and monetary systems," says a joint statement issued after talks between Xi and Merkel.

The two sides welcome the signing of the MoU, and a clearing bank will be designated later, according to the statement.

"The growing trade and investment relations between Germany and China will make the volumes of payment in RMB continue to rise. German Bundesbank supports the development of a yuan-clearing solution in Frankfurt," said Joachim Nagel, a member of the executive board of the Bundesbank.

China pays high attention to its cooperation with Germany in finance, as well as the role of Frankfurt as a financial center for both Germany and Europe, according to industry insiders.

Frankfurt is one of the most important financial hubs in Europe and the seat of two central banks, namely the Bundesbank and the European Central Bank.

Since 2009, China has promoted RMB internationalization with a three-pronged approach: facilitating international trade and investment denominated and settled in RMB, encouraging offshore RMB service centers to develop offshore RMB-denominated financial products, and encouraging central banks to hold RMB assets as part of their foreign exchange reserves.

With the Chinese currency increasingly used in international trade and investment, demand for RMB financial services from overseas individuals and corporations has gradually increased.