HARARE – Zimbabwe is in bilateral talks with China to use the Chinese yuan renminbi (yuan) as a trade currency between the two countries, in a move aimed at easing cash shortages, businessdaily has learnt.
Central bank governor John Mangudya last week said the country was in discussions with the People’s Bank of China to facilitate for trade transactions using the yuan.
“What we thought would happen is the occurrence of what we call bilateral payments to promote trade between the two countries. Where, say we are importing from them, we pay in their currency and if we are exporting they also pay in their currency,” he said.
The governor said the yuan settlement was backed by the fact that the Chinese currency is already among the country’s multi-currency system.
“This will be like what we used to do with Malaysia, but in this case we haven’t finalised this arrangement because it takes time and also because of geographical proximity,” Mangudya said.
Last year, Finance minister Patrick Chinamasa announced that Zimbabwe was to officially start using the yuan as a reserve currency of the central bank after China agreed to cancel Harare’s $40 million debt.
Use of the yuan “will be a function of trade between China and Zimbabwe and acceptability with customers in Zimbabwe,” the minister said then.
As a reciprocal gesture, Zimbabwe was expected to use the yuan in international payments to China, thus improving bilateral trade between the two countries.
Meanwhile, Mangudya said the use of the yuan in trade transactions was also going to improve trade between the two countries after trade between China and Zimbabwe grew to over $1,52 billion last year as the southern African country’s reliance on the emerging Asian giant grows.
But, the country’s trade deficit with China stands at $36,6 million as at March 31, 2016.
Data from the Zimbabwe Statistical agency, shows that Zimbabwe exported goods worth $47 000 against imports of $36,7 million from the giant Asian economy in the first quarter.
China is Zimbabwe’s biggest international trading partner following the latter’s isolation by its former western trading partners over Harare’s human rights record.
Figures from the Chinese side indicate that in the past three years, China’s official assistance to Zimbabwe reached $100 million.