In recent years, the use of the Renminbi in Africa and the construction of related financial infrastructure have been accelerating. In June, the People's Bank of China authorized Standard Bank of South Africa and Industrial and Commercial Bank of China to serve as joint renminbi clearing banks in Africa, providing renminbi clearing services in 19 African countries. On July 31, the Standard Bank Kenya Branch officially launched the Cross-border Payments System (CIPS) for renminbi transactions.
Meanwhile, the economic and trade cooperation between China and Africa continues to expand. By 2025, bilateral trade volume is expected to grow by nearly 18% compared to current levels. Starting from May 1st this year, China has implemented zero tariffs for 53 African countries that have established diplomatic relations with China. With the increase in trade and investment flows, there is also a growing demand from African financial institutions for services such as RMB settlement. Standard Bank has reported that, as of recently, transactions processed through CIPS have exceeded $1.1 billion (approximately 8 billion yuan). Angola’s second-largest commercial bank, BFA, also plans to join CIPS to meet the growing demand from its customers for direct RMB settlement services.
Why is the Renminbi accelerating its adoption in Africa? Is this change primarily due to the financial demands brought about by increased trade between China and Africa, or is the internationalization of the Renminbi entering a new stage? Does an increase in the use of the Renminbi mean that the status of the US dollar in Africa is declining? In response to these questions, Observer Network conducted a dialogue with Tang Xiaoyang, the head of the Department of International Relations at Tsinghua University.
Firstly, the issues of reducing costs and establishing financial infrastructure are related. Clearing banks are an important node in the financial infrastructure and also a crucial institution.
However, the establishment of such a financial facility, just like other infrastructure facilities, is aimed at facilitating economic and trade investments and reducing operating costs. This is because by accelerating and simplifying the settlement of trade documents, it is possible to significantly reduce costs.
Therefore, infrastructure is primarily designed to provide convenience and reduce costs.
Standard Bank of South Africa
The increase in RMB settlement is indeed related to the continuous growth of Sino-African economic and trade relations. After the implementation of zero tariffs, there has been more trade development. Under such circumstances, such a demand naturally arises.
But I don’t think this is a form of “reverse promotion”. More importantly, in China’s development system, finance serves the overall development of industries and the economy.
Therefore, as the physical economic and industrial cooperation between enterprises continues to increase, such demands naturally arise.
It is no longer just some simple large-scale infrastructure projects as it used to be. Large-scale infrastructure projects are usually funded by the China Export-Import Bank or a few enterprises, and there isn’t much demand for such RMB settlements.
And now, under the background of more comprehensive and powerful participation in economic and trade cooperation, there is a greater demand for financial services related to bill settlement, RMB settlement, and simplifying settlement costs.
Insufficient supply of the Renminbi remains an important bottleneck.
This is because the economic structures of China and the United States are very different. The United States has always had a trade deficit with the world. Since the US purchases goods from around the world, it results in a continuous supply of the US dollar to other countries.
And China has maintained a trade surplus for a long time. Therefore, the Chinese yuan will not flow into other countries in large amounts through trade deficits, just like the US dollar does. Thus, the internationalization of the Chinese yuan and the internationalization of the US dollar will not follow the same path.
In China, the RMB is primarily used as a settlement currency in direct bilateral trade. This approach reduces exchange rate costs and fluctuations, thereby enhancing the convenience of trade operations.
But it's different from the US dollar. After all, the US dollar has strong international credibility and global liquidity, which allows it to be widely used. The Renminbi, on the other hand, is generally not widely used in third-party transactions.
As for CIPS, I believe it involves more security issues related to payment systems. The SWIFT system, which is led by the United States, remains the mainstream system in the international payment landscape. However, in an extreme situation like Russia, if other payment systems are not established in advance, being excluded from the mainstream payment system could affect normal trade settlements.
Therefore, China's development of its own cross-border payment system also takes into account issues of payment security and trade protection.
CIPS is primarily designed for backup and security purposes for payment systems. It is not intended to compete with mainstream payment systems, but rather serves as a backup and security mechanism.
So, for it, it will be reflected in some key trading partners and resource-based countries. It mainly refers to key nodes among these partners and resources, ensuring that normal transactions can still be carried out even in extreme situations.
This has already achieved one of the main functions of CIPS: payment security and trade protection.
So, it is not meant to replace or compete with existing mainstream payment systems, but rather to provide support and assurance for trade networks.
I think what's really important is local financial support.
For a company's international trade and economy, using dollars or RMB actually does not have a real substantial impact on its operations. The promotion of the RMB is more about a country's need to have a secure payment system from the perspective of the entire financial system and national strategy.
But for businesses, it doesn't really matter whether they earn in dollars or renminbi. Of course, using renminbi may provide some convenience in terms of costs, but in reality, businesses can also operate using dollars.
Therefore, it is even more important for companies to receive effective financial services during their operations in a particular region. For example, whether local financial institutions can provide financing, whether there are any foreign exchange controls, whether foreign exchange settlements are convenient, and issues related to exchange rate fluctuations.
These issues actually do not entirely depend on whether a company uses dollars or RMB; rather, they depend more on whether the local financial services are stable and efficient.
Firstly, the share of the Renminbi in payment currencies is still a relatively important indicator, as the use of the Renminbi itself is an economic measure.
Secondly, it is about looking at the proportion of the Renminbi as a reserve currency in various African countries. This is more of a political indicator, which can reflect the political influence of the Renminbi and China.
Thirdly, I believe it is important to consider the network size and coverage of infrastructure such as CIPS for cross-border payment in Renminbi. For example, the number of relevant institutions should be increased. When discussing the internationalization of the Renminbi, a practical and crucial goal is to ensure that the system does not rely entirely on the US dollar or a single payment system, while still maintaining the normal operation of trade transactions.
Therefore, the promotion of CIPS will be one of the important indicators for observation.
