Why the Chinese yuan could soon be Africa’s most important currency
Africa is emerging as fertile ground for Beijing’s drive to make the yuan a major international currency and reduce reliance on the US dollar, as an increasing number of financial institutions deepen their integration with China’s payment network. Following talks in Beijing between Central Bank of Libya Governor Naji Issa and People’s Bank of China Governor Pan Gongsheng last month, the country’s…
The Chinese yuan is poised to become Africa's most important currency as Beijing pushes to reduce reliance on the US dollar and strengthen its influence on the continent. Several African financial institutions, including African Export-Import Bank, Standard Bank, and Kenyan bank Stanbic Bank, have already integrated with China's payment network, the Cross-Border Interbank Payment System (CIPS).
This integration facilitates direct yuan interbank payments for trade, streamlining commercial transactions, accelerating cross-border transfers, and boosting trade flows. In addition, African lenders are tapping into China's capital market by issuing yuan-denominated debt, known as panda bonds, to fund reconstruction efforts following years of conflict.
With China being Africa's largest trading partner and the primary financier of the continent's megaprojects, the use of the yuan instead of third currencies like the US dollar or euro could facilitate even more trade at the margins.
Brief written by urgent.news from South China Morning Post's own syndicated text. Machine-written — may contain errors; check the original before relying on it.
