On Dec. 22, one of the most infamous economies in the world over the past 20 years may soon be divesting themselves of dollar hegemony and moving over into the camp of the Chinese Yuan. In a move dedicated towards strengthening both monetary and trade ties with the Far East power, Zimbabwe’s Finance Minister said that very soon the Yuan could be used as one of many currencies within the African nation’s economy, and help support their financial system by including it in a basket that already allows use of the dollar in everyday transactions.
Zimbabwe of course is well known for entering into a hyper-inflationary environment so great, a $100 trillion Zimbabwe note could barely buy a citizen a couple eggs, and other nominal type item.
The Chinese yuan may soon become a legal currency in Zimbabwe after Beijing confirmed it would cancel the African country’s $40 million debt.
“They [China] said they are cancelling our debts that are maturing this year and we are in the process of finalizing the debt instruments and calculating the debts,” said Patrick Chinamasa, Finance Minister of Zimbabwe.
He added that the country plans to increase local use of the yuan which was added to Zimbabwe’s basket of currencies last year. A multi-currency system has been in operation for the last six years, with the South African rand and US dollar in use since hyperinflation in 2009. At the peak of the crisis, the local currency became almost worthless, with 35 quadrillion Zimbabwean dollars equaling one US dollar.
The yuan hasn’t been approved yet for public transactions in the Zimbabwean market which is currently dominated by the US dollar.
Use of the yuan “will be a function of trade between China and Zimbabwe and acceptability with customers in Zimbabwe,” said Chinamasa.
According to the finance minister, Chinese tourists could start paying for services in yuan and Zimbabwe could use the currency to pay its loans to China.
The minister added that the central banks of the two countries are already negotiating on a yuan clearance system. – Russia Today
Zimbabwe is just the newest country to accept the Yuan in international trade since the IMF approved its inclusion in their SDR basket of currencies earlier this month. And with China expanding its presence exponentially in places like Africa over the past five years, it may not be long before other African countries follow Zimbabwe, and use of the dollar diminishes in trade on the continent.
Before Libyan President Moammar Qaddaffi was brutally killed, he had spearheaded a movement to create a gold-backed African currency not unlike the Euro used by the European Union. And since one of China’s ultimate goals is to bring a return of gold in the global monetary system, acceptance of the Yuan now may simply be a pre-cursor to the yellow metal finding its way into all trade and commerce, with Africa being one of the first on-board this monetary system.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com, Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.