It's a tale of two cities. As Shanghai and Hong Kong vie to use yuan liberalization to bolster their market status, it's the best of times of those supporting a freer yuan but perhaps the worst of times for those impatient to see a free-floating currency.

It's been five years since China inaugurated a yuan-reform program aimed at strengthening its standing as a rising economic power by slowly transforming the yuan into an international currency. At the same time, authorities have been anxious to avoid currency market speculation, hot money flows and chaos for exporters, keeping the currency firmly under government control.

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Beating back pressure from the US and the European Union for a rapid appreciation in the yuan, China's cautious approach toward liberalization of its not-free-flowing currency is now at the stage of expanding investment options in the yuan.

Shanghai is playing a key role in pilot programs set up to move that process forward. The city's institutions were among the first to be allowed to engage in yuan settlement for cross-border trade, issue yuan-denominated bonds for incorporated overseas banks and authorize the establishment of yuan-exchange companies.

What was launched in Shanghai is slowly expanding across the country.

In late June, China expanded the trial program for yuan settlement for cross-border trade to 20 provinces and municipalities. It had been previously restricted to Shanghai and four southern Guangdong Province cities.

More programs are in the pipeline.

Shanghai is pushing forward a mechanism to allow overseas companies that open cross-border trade settlement accounts at banks in Shanghai to invest in the domestic equity, bond and interbank credit markets.

"Such companies already have access to the yuan through trade settlements," said Fang Xinghai, director at the Shanghai Financial Services Office. "All we need to do now is to set up a mechanism to let them have more investment options beyond just waiting for the currency to appreciate."

China's capital account is now limited to overseas companies. Its current account, the one for trade, is open.

Meanwhile, Shanghai is also preparing to launch an international board at the Shanghai Stock Exchange to allow qualified foreign companies to issue yuan-denominated stock in China.

"The China securities regulator has prioritized the international board on this year's work agenda," said Wang Jianjun, deputy director of the office of the China Securities Regulatory Commission.

What's more, the securities regulator is also planning to allow companies listed on the board to convert the capital they raise for overseas investment.