China has become the largest investor in Zimbabwe, which has been shunned by the West over its human rights record and is struggling to emerge from a deep 1999-2008 recession that forced the government to ditch its own currency in 2009.
According to reports, making the yuan official, legal tender in the country will further Zimbabwe’s goals of tightening trade relations between it and China. Yuan was included amongst the foreign currencies later, but it did not receive approval for public transactions.
China is Africa’s largest trading partner and Zimbabwe’s second largest, after South Africa.
The president was speaking in Harare today at a state funeral, at which he said the use of the Chinese currency also offers new possibilities for Zimbabwe.
Under the new policy, the USA dollar is likely to remain the most popular currency, but the yuan would become an alternative, primarily among Chinese tourists and traders at first.
Finance Minister Patrick Chinamasa said the countries were negotiating the final amount of debts to be cancelled, The Guardian reported.
Early in December, during a four-day tour of Southern Africa, Chinese President Xi Jinping met with Zimbabwe’s leader Robert Mugabe.
The hope is that by easing the use of the Chinese Yuan, African countries can begin to address the massive trade imbalance between the continent and China.
In his words, “There can not be a better time to do this”.
“I am happy the ministry of finance and the reserve bank governor are looking at other strategies of reforming the banking sector and injecting liquidity into the market”, Mugabe said at the burial of Aguy Georgias, a prominent businessman-turned-politician and deputy minister.
“The yuan is among currencies that are in the basket of currencies and there are nine currencies that are in that basket like the U.S. dollar, the pound, the rand, the Euro, the yuan … so, we are saying how do we improve trade between the two countries”.
The International Monetary Fund last month admitted the yuan into its benchmark currency basket, a recognition of Beijing as a global economic power.