"Instead of dim sum bonds under Chinese names, overseas investors would prefer companies they know. Even European sovereign wealth funds and pension funds would be interested in yuan products issued by blue chips."

Though starting late, London's yuan business is taking off. Last June, the UK signed a 200 billion yuan ($32.8 billion) currency swap deal with China, becoming the first G7 country to do so.

During Osborne's visit to Beijing in October, London was granted an 80 billion yuan investment quota under the Renminbi Qualified Foreign Institutional Investors program (RQFII). On Jan 9, the first RQFII exchange-traded fund listed on the London Stock Exchange, opening the doors for investments in Chinese stock markets in renminbi.

The latest report from the City of London shows that in the first half of last year, London experienced steady growth in renminbi business in trade-related services. The volume of letters of credit reached a total of 3.3 billion yuan, while a number of major banks saw an increase in requests from UK-based banking customers to make trade payments in renminbi.

"The rise of London as an RMB center is not necessarily harming Hong Kong. Without a clearing bank, there was not much RMB trade settlement there. So the new business means no loss to Hong Kong," said ANZ's Yeung. "On the contrary, we now have one counter-party for transactions."

"Competition between offshore renminbi centers such as Hong Kong, London and Singapore is a matter of fact. As an established international financial center, it's not a surprise to see London bearing bigger ambitions than the others," Wang added.

"However, healthy competition will only bring more variety. That's what investors want to see and will activate the market in a longer term."

According to Standard Chartered Bank, Hong Kong, by far the most buoyant offshore RMB center, is on track to reach the 1 trillion yuan milestone of renminbi deposits this year.

The Hong Kong Monetary Authority reported in January that yuan deposits in the city rose 4 percent to 860.5 billion yuan at the end of last year. The total remittance of renminbi for cross-border trade settlement amounted to 469.6 billion yuan.

France leads eurozone in offshore RMB payments

Clearing facility to support London's renminbi business