Chinese yuan should be steady for wider use in Africa as reserve currency and in trade: analysts
The Chinese government should keep the yuan steady and increase investment channels in Africa for the yuan to become a widely used currency in that continent, experts said on Wednesday.
"The yuan's use in Africa still does not match China's increasing business interaction with African countries," Sang Baichuan, director of the Institute of International Business at the University of International Business and Economics, told the Global Times on Wednesday.
A trader from Guangzhou, capital of South China's Guangdong Province, surnamed Dai who does business in the African country of Togo, said that the yuan is rarely used there.
"The euro and U.S. dollar are commonly used in trade transactions in Togo. The yuan is rarely used in local trade," she told the Global Times on Wednesday.
Zhang Zhe, deputy professor at the Institute of African Studies under Zhejiang Normal University, told the Global Times on Wednesday that in her observation in several African countries, use of the yuan is still very uncommon, whether in terms of investment, trade or daily activities.
But she also sensed a strong top-level push in both China and African countries to increase use of the yuan in recent years. For example, Nigeria recently began selling the yuan to local traders and businesses, shortly after agreeing to a three-year currency swap signed with China in April, according to a report by Quartz Africa on August 2.
Other African countries including Egypt and South Africa have also signed currency swap agreements with the Chinese government in recent years.
A total of 14 African countries had gathered in May to discuss the possibility of including the yuan among their national reserve currencies, the Xinhua News Agency reported in June.
Sang said that with rising economic and trade cooperation between China and Africa, prospects are bright for the yuan's common application in Africa.
"A necessary condition for popularizing use of the yuan in African countries is that the government should keep the yuan stable and firm, as a fluctuating yuan would add to traders' worries about possible losses in business," Sang remarked.
"With the U.S. dollar strengthening, it's not a good time for African traders to use the yuan, but in the long term a firm yuan would appeal to local businessmen," Sang said.
He also mentioned that the government should set up more financial networks in Africa to facilitate local residents' handling of yuan businesses.
Zhang said that domestic banks can start by investing in African banks or international banks that have a wide network in Africa.
One good example is the Industrial and Commercial Bank of China, which took a 20 percent stake in Standard Bank in 2007, one of the largest Africa-based banks, she said.
According to Sang, the government should also take measures to multiply the yuan's investment channels in Africa, such as bonds, so that local people would be more willing to hold the yuan among their financial assets.
