In Zimbabwe, despite increased trade with China, the yuan may still be far from being a commonly used currency. Although South Africa is one of Zimbabwe`s largest trading partners, the US dollar, not the rand, remains the most widely used currency, as Gift Mugano, a trade expert at Nelson Mandela Metropolitan University, pointed out when Zimbabwe added the yuan to its basket of currencies last year. However, according to a Zimbabwean analyst, the yuan has been legal tender for two years now, and Chinamasa`s comments are quite confusing. China has become the largest investor in Zimbabwe, shunned by the West for its human rights record and struggling to emerge from a deep recession in 1999-2008 that forced the government to abandon its own currency in 2009. Now China is appearing on the scene. The Asian superpower wants to strengthen its presence on the African continent. China has become one of Zimbabwe`s most important trading partners and its currency is already circulating throughout the country. In October 2016, the Chinese yuan – or Remimbi – will be introduced as the third official legal tender in Zimbabwe. China will cancel debts worth about €37 million. Not too shabby, given that Zimbabwe`s gross domestic product is only around €12 billion. But Robertson suggested that although China is active in Zimbabwe`s markets and economy, it does not want to sell goods there in exchange for Chinese currency. But people who accept payments will want it in dollars rather than yuan, which will hurt China`s interests a lot.

Vice President Emmerson Mnangagwa yesterday suggested having the Chinese currency, the RMB/yuan, as legal tender in Zimbabwe when he met with his Chinese counterpart Li Yuanchao. More importantly, Zimbabwe`s announcement of the yuan came just a week after China finally managed to add the yuan to the IMF`s basket of currencies. China is trying to usurp the place that the US dollar currently occupies in the Zimbabwean economy. The dollar already functions as an “economic lingua franca” in Africa, with the greenback being unofficially accepted in many countries. From Beijing`s point of view, the promotion of the yuan makes sense and the use of its currency by third parties is a sign of international economic importance. Various states in Latin America and Polynesia already officially use the dollar, so what Washington can do, Beijing is trying to do. Vice President Emmerson Mnangagwa met with his Chinese counterpart in Beijing and suggested that the Chinese yuan be legal tender in Zimbabwe. Zimbabwe abandoned its own currency in 2009 after hyperinflation rendered the Zimbabwean dollar worthless. It then began using a number of foreign currencies, including the US dollar and the South African rand. The yuan was then added to the basket of foreign currencies, but its use had not yet been approved for public transactions in the greenback-dominated market.

Zimbabwe plans to adopt the Chinese yuan as legal tender in exchange for debt relief worth about $40 million — a move that one economist said “has no future.” But more yuan transactions may not help reduce the already large trade imbalance between China and Africa. China accounts for just over 20% of imports to Africa, but only about 15% of the continent`s exports to China. Over the past year, these exports have declined, while Chinese exports to the mainland are increasing. BancABC chief economist James Wade said the yuan was increasing Zimbabwe`s options. This visit and the associated treats for Zimbabwe can be seen as a reward for China`s efforts to internationalize the use of the yuan. Given the amount of business China does with Harare, the use of the yuan will make Zimbabwe`s imports cheaper, especially if Harare is currently paid in dollars. In addition, the use of the yuan could boost Chinese tourism to Zimbabwe, as Chinese tourists could pay for services using the yuan instead of Western currencies. The first step, according to the country`s finance minister, Patrick Chinamasa, is to allow Chinese tourists to pay for services in yuan.

Zimbabwe would then be able to repay its remaining debts to Beijing. Zimbabwe announced it would make the Chinese yuan legal after Beijing confirmed it would cancel $40 million in debt. “There is no yuan circulating in the country,” Robertson said. “The South African rand and the US dollar were the dominant currencies. So it`s a strange situation now that the yuan has no future at all. A reserve currency is a foreign currency held in large quantities by governments and financial institutions to repay international debt. “I don`t think it will make much difference to anyone since we already use foreign currency,” he said. Zimbabwean Finance Minister Patrick Chinamasa announced the plan in a statement on Monday, saying the use of the yuan “will depend on trade between China and Zimbabwe and customer acceptance in Zimbabwe.” The use of the yuan “will depend on trade between China and Zimbabwe and customer acceptance in Zimbabwe,” the minister said. Sam Pa (pictured) is a perfect example of China`s ambitions in the region, having acted as Beijing`s fixer and negotiator in dozens of African countries. Pa – who was arrested in 2014 during an anti-corruption campaign – allegedly gave $100 million to Mugabe`s Central Intelligence Organisation (the main instrument of repression in the country) in exchange for access to diamond contracts. In 2014, the country`s central bank allowed traders to use the US dollar, South African rand, Botswana pula, British pound, euro, Australian dollar, Indian rupee, Japanese yen and Chinese yuan. “But they don`t have to make concessions. It`s pretty meaningless as it looks.

“It`s not like we`re forcing people to use the Chinese yuan,” he said. “. We are expanding the possibilities they can use. The goal of facilitating the use of the yuan is to increase bilateral trade, including helping African countries export more to China. When Kenya opened its yuan clearing house in Nairobi with the National Bank of Kenya this year, the bank`s managing director, Munir Mohamed, said: “Africa should ensure that the renminbi is accepted internationally for renminbi conversion and vice versa to balance trade between Africa and China.” Zimbabwe allowed the yuan as legal tender for two years. But Chiconi said he didn`t use it. Instead, most traders prefer the stability of the US dollar, which is used as the country`s main currency. Perhaps the strongest symbol of the country`s dysfunction has been its historic hyperinflation, which peaked at 79.6% sextilion. Zimbabwe abandoned its own currency in 2009, making the South African rand and the US dollar legal tender in the country. Since then, it has also added the pound sterling. These measures have curbed inflation, the eternal bogeyman of the Zimbabwean economy.

The People`s Bank of China and the Reserve Bank of Zimbabwe are studying the feasibility of using the Chinese currency, renminbi or yuan as part of the multi-currency system. Given these existing solutions, Zimbabwe`s recent introduction of the yuan as legal tender seems unnecessary. However, the move offers an interesting glimpse into Harare`s relations with China, as Beijing is one of the main drivers of Zimbabwe`s recovery. “The reserve currency is held to support the value of national currencies,” international investment expert Justin Kuepper wrote on the International Invest website. The yuan will become the latest currency to be approved for public transactions in Zimbabwe as the South African nation seeks to boost trade with Beijing “The yuan was included in the so-called multi-currency system a few years ago. This is not new. What is different is the seizure of debts. It seems that the government is trying to pass this off as a concession from China. The Chinese yuan could soon be used as legal tender in Zimbabwe. Zimbabwe`s finance minister said China and the South African country were negotiating plans to increase local use of the yuan. The two countries are also discussing the cancellation of $40 million in debt owed by Zimbabwe to China, its largest investor.

Chinamasa also announced that Zimbabwe would officially make the Chinese yuan legal to boost trade with Beijing.