17 central banks and government officials from 14 countries in Eastern and Southern Africa met in Harare last week to discuss the possibility of using the Chinese Yuan as a reserve currency.

The forum, which took place on Tuesday and Wednesday, was attended by deputy central bank governors, deputy permanent secretaries, and officials from the African Development Bank.

“Most countries in the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) region have loans or grants from China and it would only make economic sense to repay in renminbi (Chinese yuan),” said MEFMI spokesperson Gladys Siwela-Jadagu.

“This is the reason why it is critical for policymakers to strategize on [the] progress that the continent has made to embrace the Chinese yuan which has become what may be termed ‘common currency’ in trade with Africa,” she added.

MEFMI is made up of Uganda, Angola, Zimbabwe, Botswana, Burundi, Kenya, Malawi, Lesotho, Namibia, Rwanda, Mozambique, Swaziland, Tanzania, and Zambia.

The attendees that gathered at the event also discussed the weakening external positions of most member nations due to the global economic slowdown. Additionally, other points of discussion were risk perceptions, capital flows, and financial products that African countries can use.

Taking Advantage of the Growing Yuan

Earlier this year, some central banks from Europe showed interest in holding the Yuan as part of their foreign currency reserve because of its rise as a unit in the global major foreign exchange reserve.

“With China as the largest trading partner of over 130 countries, the main challenge for African countries is how to benefit from the new pattern of international commerce,” said Siwela-Jadagu adding that Africa cannot afford to delay in taking advantage of the opportunities China has to offer.

China’s aim to make the Yuan a major global unit of foreign exchange was boosted this year as the currency stabilised leading to rising foreign exchange purchases of stocks and bonds.