The Sunday Mail
China has once again proved to be Zimbabwe’s all weather friend with the Reserve Bank of Zimbabwe and the People’s Bank of China engaging in crucial discussions to finalise modalities that could see Zimbabwe using the Chinese yuan next year.
This comes at a time when Zimbabwe and China have signed landmark deals worth US$4 billion that are set to convert provisions of the Government’s economic blue-print Zim-Asset into programmes of action. The two countries signed 12 investment agreements covering different sectors of the economy.
The move by the RBZ and People’s Bank of China shows the strengthening of the yuan on the global trading market and it’s stability, which will inevitably rub on to Zimbabwe once the Asian giant’s currency is in use.
What is particularly exhilarating in this case is that plenty of international investors, Chinese nationals included, have been courting Zimbabwe and the adoption of the yuan is set to open avenues for more investments and trade opportunities between the two countries.
With Zimbabwe having officially adopted the Chinese yuan as legal tender in its multi-currency basket and confirming it in 2014’s Monetary Policy Statement, Finance and Economic Development Minister Patrick Chinamasa and Reserve Bank of Zimbabwe Governor Dr John Mangudya have finally set the ball in motion with regards to actively adopting the currency.
The financial chiefs took their time. After all, good things come to those who wait.
As we report elsewhere in this publication, Dr Mangudya explains that the market decides when it is convenient to adopt a foreign currency.
He says: “After the announcement of intention to adopt this currency, it was up to the market to decide and take it up. So, it was not enough to just make an announcement because its usage would need to be determined by a number of factors, chief of which is the actual use by the market.”
Now a year down the line, the market seems to have decided to adopt the Chinese yuan. This in a way, is a confirmation that Zimbabwe’s financial system is now stable and ready for further surgery.
The trade and investment volumes between China and Zimbabwe, and also the fact that China is the second largest economy in the world and the largest consumer of world commodities, is a strong conviction for Zimbabwe, and in fact the whole world, to adopt the Chinese yuan as a trading currency.
Which is the reason why on November 30 this year, the International Monetary Fund added the Chinese currency to its Special Drawing Rights reserves alongside the euro, the US dollar, the British pound and the Japanese yen.
The Chinese yuan, is by all means a very strong currency given that it has placed China as the world’s second largest economy.
If this deal sails through, which is highly likely given Minister Chinamasa and Dr Mangudya’s optimism, Zimbabwe will need to make the most out of it and make hay while the sun shines. The adoption is something we can leverage on in growing our economy.
We will need to produce more goods and services for export to China so that their currency flows into the country coffers.
Given that China is the second largest consumer of Zimbabwe’s products after South Africa with goods worth over $US1 billion being traded annually between Harare and Beijing, it only makes economic sense to trade with the Chinese in their currency.
As Minister Chinamasa notes, the US dollar is currently dominating the local market due to its global accessibility and acceptability. The same needs to happen with the Chinese yuan because China is now an unquestionable global economic giant and Zimbabwe is slowly but surely tagging along.