Hungary’s central bank is mulling holding some of its foreign currency reserves in Chinese yuan, it said in a statement on February 19.

The move is part of the Budapest Renminbi Initiative that the Magyar Nemzeti Bank’s (MNB) is launching this year. The purpose of the initiative is to expand the investment spectrum and financing sources of Hungary and create money, foreign exchange and capital market infrastructures. It can generate cross-border market activity and income for both Hungary and Central and Eastern Europe, the MNB added.

Within the framework of the initiative, the MNB will also examine financial stability and supervisory issues related to the use of the Chinese currency, and the cross-border activity of Chinese banks.

The MNB said that it is the only central bank in CEE to have a foreign exchange swap agreement with the People’s Bank of China. "Hungary is where the only Chinese commercial bank operates within the region; and in recent years Hungary has become one of the most important regional target countries of Chinese investment capital flows and migration," the statement reads.

Hungary has long sought to grab a slice of China's massive investment war chest, as well as increase trade with the Asian giant in a bid to diversify its export markets. The EU buys nearly 80% of goods and services sent out of Hungary. However, while China’s share of Hungary’s annual imports stands at 5.2%, it accounts for just 1.9% of exports.

China and Russia have long been looking for ways to reduce the role of the US dollar in international trade. In December, the two countries moved to switch to domestic currencies in trade.

The launch of the Budapest Renminbi Initiative comes just days after Russian President Vladimir Putin paid a controversial visit to Budapest during which Hungary’s Prime Minister Viktor Orban showed his renewed lean towards Moscow.