(ECNS) - Zimbabwe has adopted the Chinese yuan as one of its legal currencies, but it remains unclear if this is good news for China, the Changjiang Times reported on Monday.
Zimbabwe's own currency, the old Zimbabwean dollar, ceased circulation in 2009 and would have converted into yuan at a ratio of 40 trillion to one.
The move by Zimbabwe signifies the expansion of the yuan into the global trading market.
However, Xu Qiyuan, a researcher at the Chinese Academy of Social Sciences, says it may put a heavy financial burden on China, which could be held accountable for the stability of Zimbabwe's financial system.
Xu says Zimbabwe can establish a yuan-centered currency system only if it meets certain conditions, including strict controls on financial deficits and the volume of foreign debt.
Zimbabwe, once a colony of the UK, has seen significant inflation over the years. Therefore, Zimbabwe has introduced several foreign currencies for relief. Meanwhile, there is no rush to reenact the Zimbabwean dollar, says Charity Dhiwayo, governor of the Reserve Bank of Zimbabwe.
In 2009, Zimbabwe adopted the US dollar and the South African rand. In 2014, Zimbabwe announced it would accept more foreign currencies, including the Japanese yen, the Australian dollar, the Indian rupee, and the Chinese yuan. However, in practice, the US dollar has been dominant in local markets.
