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The Chinese currency renminbi (RMB), or the yuan, has attracted more and more attention in African countries with its advantages in facilitating China-Africa trade and investment, optimizing the structure of foreign exchange reserves and stabilizing the financial system. Officials, experts and scholars from various African countries have seen it as an inevitable trend for the RMB to be adopted as Africa's reserve and settlement currency in the future, which will not only benefit local economic development, but also boost the internationalization of the RMB. RMB GAINS INCREASING POPULARITY IN AFRICA Officials of central banks and finance ministries from 14 African countries have suggested considering the RMB as a reserve currency and expanding its use on the whole continent, said Caleb Fundanga, executive director of the Macro Economic and Financial Management Institute (MEFMI) of Eastern and Southern Africa. Given China's growing share of the global economy and its status as an important trading partner for countries in the region, it would be beneficial for African countries to use the RMB as a reserve currency, Fundanga said. It is reported that countries such as Rwanda have included the RMB into their foreign exchange reserves. South Africa, Nigeria and others have signed currency swap agreements with China, while Kenya, Zimbabwe and Botswana have shown a strong interest in using the RMB as a reserve or settlement currency. Doreen Makumi, corporate communications manager at National Bank of Rwanda, told reporters that given the rapid growth of bilateral trade, Rwanda has had the RMB in its foreign reserves since 2016, which has provided ample foreign exchange facilitating transactions between the two sides. ADOPTING RMB AS RESERVE CURRENCY CONDUCIVE TO AFRICA'S ECONOMY Adopting the RMB as a reserve currency would increase China's influence in trade by significantly reducing transaction costs and attracting more Chinese investment, said Charles Siwawa, chief executive officer of the Botswana Chamber of Mines. Namibian economic analyst Harold Snyders believes the RMB is much more stable and stronger than regional currencies such as the South African rand, which could turn around Namibia's sluggish economy. The international settlement of African countries is mainly in the U.S. dollar, but there is not much direct trade with the United States, and their total trade with China is larger. The inclusion of the RMB in their "currency baskets" will help reduce transaction costs and improve financial security, said Zhu Yongkai, business manager of the Nairobi office of the Bank of China. RMB'S ENTRY INTO AFRICA TO BE FURTHER UNBLOCKED Some officials and experts have also said that in the vast majority of African countries, there is still a lot of room for the development of the RMB as a reserve and settlement currency. They suggested the investment in Africa be combined with the internationalization of the RMB, so as to accelerate the financial cooperation between China and Africa. Li Feng, head of the Tanzania office of the Bank of China, believes that the signing of currency swap agreements, the promotion of direct exchange and listed transaction of the RMB, as well as its pricing for bulk commodities are the three directions for future cooperation between China and Africa. In addition, it is also necessary to speed up the construction of branches of Chinese banks in Africa, build a network of institutions covering major regions in Africa, and improve the recognition of the RMB in the African market and its exchange routes, he added. |
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