I am talking informally. The Yuan is not fully convertible, but yet, it can and it is used for trading goods and services. It is not attractive as a reserve currency or as an investment, but on bi-lateral and tri-lateral trade it is perfectly usable. And as china is the biggest manufacturer in the world, for a lot of countries it may make sense to trade in yuans. Sell some copper to China in Yuans, buy some SU-35s from Russia using Yuans, then Russia buys chips from China with those Yuans.

They created a convertible market in hong kong. The currencies are the same but can be de-pegged (CNY and CNH). Overall, I think china will prefer to do managed big deal one-on-one with other countries. This might not cover all of their trade but probably a large (50%+) of it.

As far as I am aware, the Yuan (essentially a unit quantity of currency) is fully convertible and can be traded, but the Renminbi (the currency itself) is not. It's a bit weird that these are not the same thing. It may not be possible to use the Yuan for everything you need without also moving some Renminbi around. However, you can use the Yuan as the unit on which the trade balance of a country is counted - $1 billion Yuan of oil against $1 billion of silicon chip for example - without any Renminbi changing hands.

is that not just bartering with more steps?

Money is sort of just bartering with extra steps.

You can record balances of Yuan, but I assume those can't technically be settled in cash without using renminbi. So just don't settle the account.

The point of US dollars is that there are more people who accept US dollars for their trades, and therefore settling in US dollars is safe - you will always find someone else to trade with holding US dollars.

Barter, on the other hand, even if using yuan as the unit of accounting, has the drawback that you can only trade with people who accept yuan and is willing to barter with you (or you find a willing set of trade partners to chain barter with).

Transferring and settling balances are different. You can also transfer Yuan without settling in Renminbi. This is very confusing to deal with, but think about transferring balances as bank account numbers and settling as moving cash. You can do a lot more than just barter without using cash.