This will be at least 40% of the trade between China and Africa.
According to the research titled “BRIC-Africa: the redback’s rise is an opportunity for Africa”, Standard Bank economist Jeremy Stevens, based in Beijing explains that renminbi internationalisation is the latest manifestation of China’s continuously shifting domestic economic system.
“The $100-billion in renminbi-denominated trade by 2015 amounts to more than the total Sino-African trade in 2010. In addition, at least $10-billion of Chinese investment into Africa will be denominated in renminbi over the same period,” says Jeremy Stevens in a statement from the South African-based bank with a subsidiary in Ghana known as Stanbic Bank.
He said among the main benefits for Africa of renminbi internationalisation will be cheaper funding and lower transaction costs, all on a large scale.
“China wants to increase the pairs against which the renminbi can trade, broaden the currency’s geographical reach and allow the renminbi for investment purposes. The change, which will be gradual, is symptomatic of a more multi-polar world,” says Stevens.
The Bank estimates that there are about 1500 Chinese firms operating in 18 African countries and there are as many as one million Chinese people in Africa.
Firms will want to grow their businesses in Africa, open renminbi accounts and use renminbi products; workers will want to send money home, says Stevens.
Stevens says China will start the programme by targeting African partners which are destinations for sizable Chinese exports, regional heavyweights and have mature financial markets: first Nigeria and South Africa, then Kenya, and afterwards Angola and Ghana.
Nigeria recently announced plans to convert 10% of its $33 billion foreign reserves from US dollars into Chinese yuan due to trade between the two countries.
Governor of the Nigerian Central Bank, Mr. Sanusi Lamido Sanusi disclosed this during a recent trip to Beijing, China, according to the Christian Science Monitor.
This means up to $3.3 billion will be converted into yuan and the central bank will use the foreign reserves to manage its own currency’s value.
But Mr Alhassan Andani, Managing Director of Stanbic Bank Ghana has warned that Ghana must not rush into making a decision to invest part of its foreign reserves into the Chinese yuan.
“It is too early and premature for Ghana to consider such calls to put some of its reserves in the yuan,” Mr. Andani told the Ghana News Agency in Accra recently.
By Ekow Quandzie