GREATER USE OF RENMINBI BY AFRICA EXPECTED FOLLOWING ITS INCLUSION IN SDR BASKET

With China's financial co-operation with African countries growing from strength to strength, there has been a rapid rise in the number of transactions denominated in the Chinese currency, the Renminbi, on the continent.

The trend is expected to pick up momentum following the recent inclusion of the Renminbi, also known as Yuan, in the basket of currencies drawn from among the elite global currencies y which make up the Special Drawing Rights (SDRs) of the International Monetary Fund (IMF).

China has long hoped to see a rapid use of the Yuan in Africa, commensurate the importance it attaches to its economic and political co-operation with the continent. Economic trends in Eastern and Southern Africa show that this wish is materializing, as evidenced by the growing demand and acceptance of the Chinese currency.

In Kenya, CFC Stanbic Bank was among the first major facilitators of the trade and economic relations with the introduction of a direct currency exchange between the Renminbi (RMB) and the Kenya Shilling. This helped reduce currency transaction losses in the process.

CFC Stanbic Chief Executive Philip Odera says the expanded trade between African countries and China has made it necessary for traders from African countries to stock up on the RMB to meet constant demand for Chinese imports.

Kenyan economist Dr Gerishon Ikiara said the growth of the Chinese currency was a guaranteed matter, not a matter of if, but when, depending on the demand factors.

"The Chinese currency, the Renminbi, was little known in Kenya and indeed the majority of African countries largely because it had not been used much as an international or hard currency in the settlement of trade transactions," Ikiara told Xinhua in a recent interview.

"As a result of this, forex bureaus and many other financial institutions rarely handled the Chinese currency, partly because both demand and supply were insignificant," Ikiara added.

The IMF included the RMB among the currencies of its basket of currencies which make up the Special Drawing Rights in what was read as a sign of confidence in China's economic stability.

The good news of the Yuan's growing acceptance as a medium of exchange and as a store of value was being reported by traders in countries such as South Sudan, where traders seek to hold the Yuan.

Simon Akuei Deng, Secretary General of South Sudan Chamber of Commerce, Industry and Agriculture (SSCCIA), welcomed CFC Stanbic's introduction of Yuan transactions into South Sudan.

In South Sudan, traders have reported a rising demand for the Yuan in the market, driven by the demand from South Sudanese business people who trade with China.

Trade in South Sudan was initially affected by the dollarization of the business environment which was affected by the government's step to devalue the national currency, the pound.

Deng described the growing use of the Yuan as a "mutually beneficial arrangement" because both the suppliers in China and the importers in South Sudan will enjoy the trade facilitation eased by the currency availability through CFC Stanbic Bank's introduction of Yuan-denominated transactions.

Ikiara said the listing of the Yuan by the IMF made the Chinese currency acquire new status, increasing its utilization in the settlement of global trade transactions. Ikiara predicted that virtually all financial institutions in both developing and developed countries will, out of necessity, make RMB a key hard currency in their operations.

In South Sudan, with nearly 60 per cent of all imported goods, including electrical goods, construction material and heavy machinery coming from China, the expansion of the Chinese currency offers a short-cut to trade, long affected by delays in making bank transfers and variation in exchange rates.

Source: NAM NEWS NETWORK

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