The internationalization of China' s currency, the renminbi (RMB), and the changes that accompany it, could eventually transform global capital markets, Deputy Governor of the Reserve Bank of Australia (RBA) Philip Lowe said on Wednesday.

Speaking at the Centre for International Finance and Regulation (CIFR) conference on the internationalization of the RMB in Sydney on Wednesday, Lowe said China's transition to a more flexible exchange rate will be gradual but it also has the "potential to create a seismic shift in the international monetary and financial landscape".

Lowe said China clearly had an interest in getting the process right, while the rest of the world, including Australia, had a strong interest in the outcome.

"Over the past few years, the share of China's international trade that is denominated in RMB has risen significantly and this trend is expected to continue," he said.

He said the Chinese authorities had signaled their intention to further liberalize the capital account and move to a more flexible exchange rate.

"We saw the latest step in this transition just last week when the daily trading range for the RMB against the U.S. dollar was widened from 1 percent to 2 percent," Lowe said.

"While the journey is clearly a gradual one, I suspect that over the years ahead, the further liberalization of the Chinese capital account could turn out to be one of the really significant events in global capital markets."

Lowe said it was important that China liberalizes trade in the RMB despite the difficulties.

"History teaches us that financial deregulation is an inherently risky process, but that there are substantial payoffs if it is done well." Endi