China has signed agreements with Argentina, Brazil and Chile to use each other's national currencies to do business, and to open the first renminbi bank in the region. Such cooperation has been regarded as firm steps toward the internationalization of China's currency in Latin America, Chai said.

"Faced with the revaluation of the dollar and the rise in financing costs, Latin American countries would have a greater need for the renminbi as a cushion," said Chai.

The increasing use of the renminbi, within the framework of the currency accords, would cut the cost of commercial exchanges by eliminating the need to use the currently bullish dollar, according to the economist.

In addition, Latin American countries could exchange renminbi for dollars, as Argentina has recently done, to build up their foreign currency reserves at critical times and reduce the risk of default.

Chai is optimistic that the renminbi will gain circulation in the region in the near future. He called on the Chinese government to give priority to building such a mechanism so that Latin American investors can purchase Chinese financial instruments using the renminbi.