Zimbabwe and the Chinese yuan distortion

Zimbabwe is reportedly pandering to the Chinese following a move by Beijing to cancel a $40 million debt and has decided to adopt the Chinese yuan as one of its trading currencies, according to reports making the rounds since Monday when Finance Minister Patrick Chinamasa announced that the two countries were negotiating the final amount of debt to be cancelled.

The news seems to be a logical follow-up to a state visit to Zimbabwe by Chinese President Xi Jinping at the beginning of this month, but is not true.

Zimbabwe adopted the yuan as part of its multiple currency basket 23 months ago at the same time as the Indian rupee, the Japanese yen and the Australian dollar.

The announcement was made by acting Central Bank governor Charity Dhliwayo, in her monetary policy statement of January 2014.

“Trade and investment ties between Zimbabwe, China, India, Japan and Australia have grown appreciably. It is against this background of growth in trade and investment ties that in the 2014 National Budget, the Honourable Minister of Finance and Economic Development underscored the importance of including other currencies in the basket of already circulating currencies,” she said.

“In this regard, we wish to advise exporters and the general transacting public that in addition to opening of accounts denominated in Botswana Pula, British Sterling Pound, Euro, South African Rand, United States Dollar, individuals and corporates can also open accounts denominated in the Australian Dollar (AUD), Chinese Yuan (CYN), Indian Rupee (INR) and Japanese Yen (JPY).”

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