In moves analysts say are meant to burnish each country’s international reputation, Zimbabwe officially adopts the yuan in exchange for US$40 million in debt relief from China.
Contrary to reports, analysts say you’re unlikely to see a flood of Chinese bills on the streets of Zimbabwe anytime soon.
After Tuesday’s announcement that the east African country would be adopting the yuan as legal tender, headlines around the world proclaimed it as a step in China’s economic conquest of Africa and its slow march toward becoming a world reserve currency.
But African analysts rolled their eyes at what they say is more of a publicity stunt by one of the world’s economic basket cases than a deal with real consequences on the ground.
“The Mugabe government has a pattern of big announcements that are supposed to flag how important their relationship with China is,” said Deborah Brautigam, a professor of Political Economy and Director of the China Africa Research Initiative at Johns Hopkins University. “But China is much more important to Zimbabwe than Zimbabwe is to China.”
Zimbabwe’s finance minister Patrick Chinamasa said the Chinese yuan (also known as the renminbi) would be legalized for everyday use in exchange for the cancellation of US$40 million in debt. But neither side of this supposed deal is really what it seems.
The yuan has technically been approved for use in Zimbabwe since 2014, when it was added to the basket of currencies in use. The Zimbabwean dollar was abandoned in 2009 amid record hyperinflation that produced the comical and nearly worthless 100 trillion dollar bill (that’s 15 zeros).
“Yuan was included in the so-called multi-currency system a couple of years ago. It’s nothing new,” John Roberston, a professor of economics at the University of Zimbabwe, told Al Jazeera television.
But because there is so little trade between the countries, there are few paths to get yuan into Zimbabwe, leaving the U.S. dollar and the South African rand dominant among the eight official currencies.