China began trading in the yuan against the Malaysian ringgit from Thursday. The China Foreign Exchange Centre says yuan-ringgit rates will be set according to dealers' bids. The exchange rate will be allowed to rise or fall by 5 percent from a mid-point published each morning by China's central bank.

In 2009, China was Malaysia's biggest trading partner with total exchanges worth over 36 billion U.S. dollars. The two countries signed a currency swap agreement in that year for the settlement of trade deals.

Analysts say this is a significant move, as the two currencies will have more convertibility into one another.