Key facts
- China has removed tariffs on imports from 53 African countries.
- China-Africa trade rose nearly 18% last year.
- Yuan usage is expected to increase with trade exposure to China.
- Standard Bank became the first African commercial bank to connect to China's CIPS.
- Kenya converted $215 million in annual interest costs by shifting railway loans from dollars to yuan.
China's recent elimination of tariffs for most African nations, coupled with a significant increase in trade between the two regions, is poised to bolster the use of the Chinese yuan. This development aligns with Beijing's broader strategy to establish financial alternatives to Western-dominated systems. Customs data indicates a nearly 18% rise in China-Africa trade last year, with the tariff reductions expected to further stimulate these flows and encourage yuan-denominated settlements.
International Monetary Fund research suggests a correlation between yuan usage and trade exposure to China. The country has also announced new measures to promote the global use of its currency. African products, from Kenyan avocado oil to South African apples, are seeing increased access to Chinese markets following the tariff eliminations, driving demand for yuan to settle transactions with local African currencies.
While precise data on yuan adoption in Africa is scarce, growth in trade is supported by new payment platforms and some countries re-denominating debt into lower-cost currencies. Standard Chartered Kenya CEO Birju Sanghrajka noted that while the yuan is growing, it is currently seen as complementary to, rather than a replacement for, the U.S. dollar. Standard Bank, an African commercial bank, processed $500 million in yuan transactions within its first four months of connecting to China's Cross-Border Interbank Payment System (CIPS).
Beijing's tariff removal is intended to support African exports, with Chinese commerce ministry spokesman He Yadong stating that China is leveraging its market to counter unilateralism and protectionism. Bankers view the shift towards yuan as a reflection of trade growth rather than a direct challenge to the dollar's dominance. Standard Chartered Kenya is now issuing yuan-denominated letters of credit, offering discounts to Kenyan customers by avoiding dollar conversion costs.
China, alongside countries like Russia, is actively promoting payment channels that bypass the U.S. dollar, a move that has drawn warnings from U.S. President Donald Trump. Muda Yusuf, CEO of Nigeria's Centre for the Promotion of Private Enterprise, highlighted the global effort to reduce dollar dominance and noted that China is encouraging yuan settlement for exports to China.
The African Export-Import Bank, which has linked to CIPS, reports that China now accounts for 20% of the continent's external trade, up from 5% two decades ago. Other financial institutions are also facilitating this shift. Ecobank and Bank of China are collaborating on a yuan settlement product for local currencies, aiming for near-instantaneous transactions. For businesses like Sanmark Limited, a Kenyan avocado oil processor, settling in yuan offers advantages due to exchange rate benefits and potentially lower interest rates for borrowing.
China's position as a major bilateral creditor to countries like Senegal, Ethiopia, and Kenya further supports yuan adoption. Kenya has already converted significant railway construction loans from dollars to yuan, achieving substantial annual interest savings. Zambia plans to accept mining royalties in yuan from Chinese firms starting in late 2025 to bolster its reserves and manage debt owed to China. Kenya's avocado exports to China have seen a dramatic increase, with projections suggesting China could surpass Europe as a top market in the coming decade, potentially accelerating yuan-denominated trade financing.