Yuan role expands its Africa presence [Asiatimes]
July 25, 2012 Leave a comment
By Gavin du Venage
For decades, Africa’s traders have demanded US dollars or, more recently, euros when closing a deal; now China’s yuan is being adopted across the continent by businesses and banks to settle debts, raise loans and pay for imports and exports.
Until recently, few people in Africa would have been able to name China’s currency. This has changed with stunning speed over the past few years, boosted by the 2008 global crisis when the ability to borrow dollars by importers and exporters was substantially reduced.
For China too, dependent on exports, the US and Eurozone liquidity crunch was an alarming event. As a result, it also quietly
encouraged trading partners to settle more of their bills in yuan. Few regions embraced this approach more enthusiastically than Africa.
So when Li Dongrong, the assistant governor of the People’s Bank of China, said a couple of weeks ago that Beijing would now actively promote its currency for settling trade and investment with Africa, he was merely confirming what has already become a reality in many African countries.
Li told a forum in Beijing that China’s central bank would encourage the use of the yuan, also known as the renminbi (RMB), as demand for the currency in Africa increased and the continent’s economy grew.
“Chinese companies are happy to bypass the dollar,” says Peter Poon, a yuan sales and product development specialist at Standard Bank in Johannesburg, Africa’s largest bank by assets. “And African companies have been very receptive to the idea of switching to yuan-based transactions.”
So receptive that Standard Bank expects at least 40% of the US$120 billion in trade between Africa and China each year to be settled in yuan by 2015. The bank has branches in 17 countries on the continent, and is moving to providing yuan deposits and withdrawals at all of them.