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African finance leaders to debate using China’s yuan as a reserve currency

PUBLISHED : Tuesday, 29 May, 2018, 12:58pm
UPDATED : Tuesday, 29 May, 2018, 10:32pm

Central bankers and officials from 14 African nations will discuss the viability of using China’s yuan as a reserve currency for the region, Xinhua reported on Tuesday.

Seventeen top central bankers and officials from the region will meet at a forum in Harare to consider the possibility of using the yuan in national reserves, the report said, citing a statement from the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI).

The forum, to take place on Tuesday and Wednesday, will be attended by deputy permanent secretaries and deputy central bank governors, as well as officials from the African Development Bank, it said.

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Delegates will focus on the weakening external positions of most member countries, following an economic slowdown.

“Most countries in the MEFMI region have loans or grants from China and it would only make economic sense to repay in renminbi [Chinese yuan],” said Gladys Siwela-Jadagu, a spokeswoman for the institute.

“This is the reason why it is critical for policymakers to strategise on progress that the continent has made to embrace the Chinese yuan which has become what may be termed ‘common currency’ in trade with Africa,” she said.

The institute includes Angola, Botswana, Burundi, Kenya, Lesotho, Malawi, Mozambique, Namibia, Rwanda, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.

Several central banks in Europe also revealed plans earlier this year to hold yuan as part of their foreign currency reserves, highlighting the Chinese currency’s rise as a unit in the world’s major foreign exchange reserve.

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“With China as the largest trading partner of over 130 countries, the main challenge for African countries is how to benefit from the new pattern of international commerce,” Siwela-Jadagu said.

China’s strategic goal of making the yuan a major global unit of foreign exchange were bolstered this year as the currency stabilised, helping increase foreign purchases of domestic bonds and stocks.