China's Yuan Diplomacy in Africa
In a Nutshell:
- Libyan banks are set to join China's Cross-Border Interbank Payment System (CIPS) following talks between Central Bank of Libya Governor Naji Issa and PBOC Governor Pan Gongsheng, enabling direct yuan interbank payments for trade.
- Libya plans to issue panda bonds — yuan-denominated debt sold in mainland China — to help fund post-conflict reconstruction.
- The African Export-Import Bank and South Africa's Standard Bank, the continent's largest lender, have already connected to CIPS as direct participants.
- Standard Bank has been authorized alongside ICBC to jointly operate a Renminbi Clearing Bank of Africa spanning 19 countries, processing roughly $500 million in yuan transactions in its first four months.
- Stanbic Bank Ghana and Banco de Fomento Angola have activated or plan CIPS access, riding on Standard Bank's network.
- In January 2026, Zambia began collecting taxes and royalties from Chinese mining firms in yuan, with payments having started in October 2025, channeling the currency back to Beijing to fund imports and service loans.
- Kenya and Ethiopia have separately restructured portions of their Chinese bilateral debt — $3.5 billion and $5.38 billion respectively — into yuan-denominated repayment schemes to ease dollar-debt pressure.
Context
China's push into Africa's payment infrastructure builds on a decade-old strategy: CIPS launched in 2015 as Beijing's alternative to SWIFT, and by mid-2025 it linked over 1,600 institutions across nearly 120 countries, processing 175 trillion yuan (about $24.4 trillion) in 2024 alone, a 43% annual jump. Africa's heavy exposure to Chinese infrastructure debt and resource-export ties to Chinese buyers — especially in copper-rich Zambia and rail-indebted Kenya — makes it a natural proving ground, since local currencies like the kwacha are volatile and dollar liquidity is often scarce. This mirrors a broader global de-dollarization trend accelerated by US tariff tensions under the Trump administration, though the yuan's share of global payments remains modest (roughly 3% as of early 2026), suggesting the shift is incremental rather than a wholesale currency replacement.
Why it matters
This wave of CIPS adoptions and yuan-denominated debt swaps signals a structural, not symbolic, deepening of China's monetary footprint in Africa, giving Beijing leverage over trade settlement, debt servicing, and reserve composition across resource-rich economies. For the US and its dollar-based financial architecture, it chips away at sanctions leverage and correspondent-banking centrality, while for African states it offers faster, cheaper transactions but deepens dependency on a single external creditor and currency bloc. It also reflects wider "de-dollarization" momentum reshaping emerging-market finance.
What we think
Bangladesh, itself managing significant Chinese infrastructure debt and a dollar-reserve squeeze, should watch Africa's yuan pilots as a live case study in trade-offs between liquidity relief and strategic dependency. Faster, cheaper CIPS-based settlement could ease Bangladesh's own dollar-reserve pressures and reduce transaction costs for Chinese-linked trade and debt service, but broader yuan adoption risks tying Dhaka's monetary policy more closely to Beijing's financial system and diplomatic priorities, complicating its balancing act between China, India, and the US. Any move toward yuan settlement or CIPS membership should be calibrated, diversified across multiple currencies, and paired with transparent reserve-management disclosures to avoid appearing to abandon a multilateral, dollar-anchored posture prematurely.