Yuan Gains Momentum in Africa with CIPS Inter Bank Payment
Mechanism
The continent’s banks are signing up for
China’s Swift alternative, smoothing transactions and potentially avoiding sanctions
·
Libya plans to have its banks join CIPS,
enabling direct yuan-based interbank payments for trade with China.
·
Libya
also plans to issue panda bonds—yuan-denominated bonds issued by foreign
entities in China's domestic market—to help finance reconstruction.
·
Other
African institutions already connected to CIPS include African Export-Import
Bank and South Africa's Standard Bank.
·
Zambia has begun collecting taxes and
royalties from Chinese mining companies in yuan, with the currency then used
for imports and debt servicing.
·
Angola is preparing for its first bank to join
CIPS, while its central bank has allowed commercial banks to use yuan to meet
foreign-currency requirements.
·
China
has established currency-swap agreements with countries including
Nigeria and South Africa. Kenya has also converted railway debt into yuan,
while Ethiopia and Mozambique are reportedly negotiating similar arrangements.
·
China's
huge trade and infrastructure-financing relationship with Africa is creating
greater demand for direct yuan settlement.
·
Standard
Bank, which is 20% owned by China's ICBC, has been authorised to clear
yuan across 19 African countries and reportedly processed 8 billion yuan
(US$1.2 billion) through CIPS since late 2025.
·
Direct
yuan clearing can allow African businesses to trade with China without first
converting through the US dollar, potentially reducing transaction costs.
·
CIPS
could also provide African countries with an alternative payment channel
that reduces their exposure to disruptions caused by Western sanctions.
·
However,
the article does not suggest that the yuan will soon replace the US dollar
globally. Rather, it argues that the yuan could become increasingly
important for Africa–China and Global South trade.
·
Since
China is Africa's largest trading partner, the article argues that the
yuan could eventually become more important than the dollar for China's trade
with Africa.
Africa
is emerging as fertile ground for Beijing’s drive to make the yuan a major international
currency and reduce reliance on the US dollar, as an increasing number of financial
institutions deepen their integration with China’s payment network.
Following
talks in Beijing between Central Bank of Libya Governor Naji Issa and People’s Bank
of China Governor Pan Gongsheng last month, the country’s
banks are set to join China’s Cross-Border Interbank Payment System (CIPS), an alternative
to the Society for Worldwide Interbank Financial Telecommunication (Swift) system.
The
move will facilitate direct yuan interbank payments for trade. According to the
state-run Libyan News Agency, joining the network will streamline commercial transactions,
accelerate cross-border transfers and boost trade flows.
Libya
also plans to tap into China’s capital market by issuing panda bonds – yuan-denominated
debt sold by foreign entities in mainland China – which could help fund the country’s
reconstruction following years of conflict.
Other
African lenders that have connected to CIPS include continentwide lender African
Export-Import Bank and South Africa’s Standard Bank, Africa’s largest bank.
In
January, Zambia started collecting taxes and royalties from Chinese mining firms
in yuan, channelling the currency back to Beijing to fund imports and service loans.
Banco
de Fomento Angola, the second-largest commercial lender in Angola, is preparing
to become the country’s first bank to join CIPS as it seeks to meet rising local
demand for direct yuan settlements. The move follows the Angolan central bank’s
decision to allow the yuan to be used by commercial banks to meet their foreign
currency requirements.
China
has also signed currency swap agreements with several African nations, including
Nigeria and South Africa. Kenya converted its railway debt to yuan last year, with
Ethiopia and Mozambique now negotiating similar restructurings.
China
is Africa’s largest trading partner and the primary financier of the continent’s
megaprojects. Bilateral trade reached a record US$203.5 billion in the first half
of the year, with Beijing projecting full-year volumes to set records.
This
surge is driven by zero-tariff access for African exports alongside rising Chinese
shipments of machinery, industrial equipment and production inputs that have fuelled
demand for direct yuan clearing across Africa’s supply chains.
According
to Lauren Johnston, a China-Africa relations specialist and a senior research fellow
at the AustChina Institute, the greater use of the yuan
instead of third currencies such as the US dollar or euro may facilitate even more
trade “at least at the margins”.
Standard
Bank – which is 20 per cent owned by the Industrial and Commercial Bank of China
– is leading the yuan’s expansion on the continent. Authorised by the People’s Bank
of China to clear yuan across 19 African nations, it announced on July 27 that it
had processed 8 billion yuan (US$1.2 billion) via CIPS since late last year.
Its
Kenyan arm, Stanbic Bank, recently partnered with ICBC to launch direct yuan clearing
in the country, enabling local traders to settle cross-border deals without using
the dollar.
Kai
Xue, a Beijing-based corporate lawyer, said China aimed to gradually build a global
yuan-based payment system.
“By
expanding CIPS and yuan-denominated transactions, China seeks to reduce reliance
on the US dollar in international trade and create an alternative payment infrastructure,”
Xue said.
Beyond
lowering transaction costs, expanding CIPS access offers African countries a buffer
against the direct and indirect effects of Western sanctions.
“Even
when African countries are not themselves the target of sanctions, they can still
be caught up in their wider effects,” Xue said.
He
pointed to 2022, when Nigeria was forced to buy emergency supplies of Canadian potash
after being unable to import fertiliser from Russia due to Western sanctions. Similarly,
in Mauritania, US sanctions reportedly barred the country from purchasing boats
from a Chinese company needed to protect its Grand Tortue Ahmeyim
offshore gas field.
Xue
stressed that while a yuan-based system would not soon replace the dollar, it offered
African nations a viable alternative for trade with China and the Global South by
reducing their exposure to disruptions in the dollar-dominated system.
Charlie
Robertson, an Africa-focused economist, said that China’s interest rates and currency
moves would soon carry increasing weight across the continent.
“China
hopes to see its own currency displace the US dollar as the currency of choice for
its trade with Africa,” Robertson said.
“As
China is Africa’s biggest trading partner, this would make the yuan more important
than the US dollar.”