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Renminbi Gaining Popularity in Africa

Chinese currency 615w (att China Today)

Chinese Translation of the Week

The total trade volume between China and Africa was nearly $200 billion in 2012, which provides a solid foundation for the internationalization of Renminbi (RMB) in Africa. In January this year, there were 18 African countries using RMB in Sino-Africa trade, as compared to 5 in 2010 according to the statistics of the Society for Worldwide Interbank Financial Telecommunication (SWIFT). In addition, the political mutual trust, African countries' positive willingness of attracting Chinese investments, and the demand of foreign reserve diversification are all important elements that promote the internationalization of RMB in Africa.  However, in most of the cases at present, RMB is used only in single trade. To go further, RMB needs promotion with policy support and more banks in Africa to serve Chinese companies.

(人民日报驻南非记者  苑基荣)2012年中非贸易总额接近2000亿美元,这为人民币在非洲的国际化提供了坚实基础。据统计,中非贸易中采用人民币结算的非洲国家已从2010年的5个上升到今年1月份的18个。另外,中非之间的政治互信、非洲对吸引中国投资的积极意愿以及非洲外汇储备多元化的需求,都是推动人民币在非洲国际化的优势因素。虽然如此,目前人民币大部分情况下还是限于在中国与非洲国家进行单一贸易时使用,人民币要想走得更远,还需要政策层面推动,同时扩大为中企服务的银行在非洲的服务网点。

This article has been translated from Mandarin. Click here to read the original version on People's Daily.

The major RMB users are African importers

Bank of China recently transported 5 million yuan to Mauritius in order to meet the urgent demand of local businessmen. Kenya Business Daily recently reported that Kenya was planning to establish a RMB clearing and settlement center to create a direct channel for the exchange between RMB and Kenyan shilling. This will be the first in Africa.

On the windows of South Africa Bidvest Bank, there are posters for RMB purchasing. When asked, the bank staff told our reporter that "you can buy RMB here as long as it does not exceed 60% of your monthly salary." The tellers in Standard Bank of South Africa (SBSA) gave the same answer.

Although the transactions settled by RMB was only 0.5% among the total Sino-Africa trade in 2012, the recent report from Standard Chartered Bank predicted that this proportion would increase to 10% in 2015, reaching $38.5 billion.

RMB became the currency for foreign reserves

South African Reserve Bank announced on November 12th that it would invest about $1.5 billion to buy Chinese bonds, which accounts for 3% of its reserve assets. After Nigeria became the first African country to purchase RMB bonds as foreign reserves in 2011, the central banks of Tanzania and South Africa also turned to invest in RMB bond market in order to isolate the risks accompanied with the increasing yield of the US Treasury bonds. George Lo, the Director of Corporate Finance in Standard Chartered Bank in Africa, said that there would be more African countries purchasing RMB as their foreign reserve currencies with the development of RMB internationalization and the strategic demands of foreign reserve diversification.

Risk avoidance of RMB internationalization

George also said that at present China and African countries are only promoting cross-border RMB settlement at the bank level. In terms of central bank currency swap, which is a crucial step in RMB internationalization, there is no breakthrough on both sides. With the deepening economic cooperation between China and Africa, the central bank currency swap will be brought to the table gradually.

Yagan Liu, Industrial and Commercial Bank of China (ICBC)'s chief representative in Africa and a board member of SBSA, said that there were three conditions in the corresponding policies for yuan to enter the African market – clients, distribution channels and management techniques. He believes that the current cross-border RMB settlement in Africa is still in its infancy. There is still a long way to go before the true realization of RMB internationalization, and it is also a tough way with the needs to avoid varied risks.

Article translated by Laiyin Yuan, Staff Intern for the Kissinger Institute on China and the United States at the Wilson Center.

Photo attributed to China Today.

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