Yuan’s internationalization in Africa
In recent years the internationalization of the Chinese Yuan has made considerable progress in Africa, as economic and trade cooperation between the two blocks has been constantly on the rise.
The objective of making the Chinese Yuan an international currency worldwide dates back to the end of the 2000s with the establishment of the so-called “dim sum bonds”, issued by the China Development Bank in 2007, whereas in 2016 it has been included in the basket of currencies of the International Monetary Fund Special Drawing Rights. Looking at the African continent, the use of the Chinese Yuan has become more and more widespread in order to facilitate China-Africa trade, reducing transaction costs and attracting more Chinese investment. The Chinese Yuan has also become part of several African countries’ foreign exchange reserves, such as Rwanda, while South Africa, Nigeria, and others have currency swap agreements with Chinese monetary authorities, decreasing the relative weight of the US Dollar. In particular, Zimbabwe adopts the Chinese Yuan as its official currency, together with the US dollar and the South African rand.
Interesting developments might arise from the increasing use of the e-CNY, the digital Chinese Yuan, managed by the People's Bank of China, which promises immediate transactions at low or no-costs, designed to move instantaneously in domestic and international transactions. However, it should also be pointed out that, as the Chinese Yuan is not yet fully convertible, such adoption may not be rapid.
The Chinese Yuan has also been mentioned to be the currency, or part of a basket of currencies, to which the new currency of the Economic Community of West African States (ECOWAS) might be pegged to. However, the adoption of the Eco, the name of the perspective currency substituting the CFA franc, has been delayed several times and it is now set to 2027. At the time of writing, it is set that the Eco should be pegged to the Euro, nevertheless, this might be changed again in due course.