Africa is emerging as an important testing ground for China’s effort to expand the international role of the yuan and reduce dependence on the US dollar. An increasing number of African financial institutions are integrating with China’s Cross-Border Interbank Payment System, or CIPS, creating a growing network for direct yuan-denominated transactions.
Following talks in Beijing last month between Libya’s Central Bank Governor Naji Issa and People’s Bank of China Governor Pan Gongsheng, Libyan banks are preparing to join CIPS, an alternative to the Society for Worldwide Interbank Financial Telecommunication, known as Swift. The move is expected to allow direct yuan interbank payments for trade, streamline commercial transactions, accelerate cross-border transfers and increase trade flows.
Libya also plans to issue panda bonds, yuan-denominated debt sold by foreign entities in mainland China. The proceeds could help finance reconstruction after years of conflict, while further linking Libya’s financial system to China’s capital markets.
Other African institutions have already connected to CIPS, including the continent-wide African Export-Import Bank and South Africa’s Standard Bank, Africa’s largest bank. Zambia has gone further, beginning in January to collect taxes and royalties from Chinese mining companies in yuan and channel the currency back to China to fund imports and service loans.
In Angola, Banco de Fomento Angola, the country’s second-largest commercial lender, is preparing to become the first Angolan bank to join CIPS. The move is designed to meet growing domestic demand for direct yuan settlements and follows a decision by Angola’s central bank allowing commercial banks to use the yuan to meet foreign currency requirements.
China has also strengthened its monetary links with African economies through currency swap agreements with countries including Nigeria and South Africa. Kenya converted its railway debt to yuan last year, while Ethiopia and Mozambique are negotiating similar debt restructurings.
The expansion comes as China’s economic importance to Africa continues to grow. China is the continent’s largest trading partner and the main financier of its major infrastructure projects. Bilateral trade reached a record US$203.5 billion in the first half of the year, with Beijing expecting full-year trade volumes to reach new records.
The increase in trade is being supported by zero-tariff access for African exports, alongside growing Chinese shipments of machinery, industrial equipment and production inputs. Those flows are increasing demand for direct yuan clearing across African supply chains.
Lauren Johnston, a China-Africa relations specialist and senior research fellow at the AustChina Institute, said greater use of the yuan instead of third currencies such as the US dollar or euro could facilitate additional trade, “at least at the margins”.
Standard Bank is at the centre of the yuan’s expansion across the continent. The bank is 20% owned by the Industrial and Commercial Bank of China and has been authorised by the People’s Bank of China to clear yuan across 19 African nations. On July 27, it announced that it had processed 8 billion yuan, equivalent to US$1.2 billion, through CIPS since late last year.
Its Kenyan subsidiary, Stanbic Bank, has also partnered with ICBC to introduce direct yuan clearing in Kenya. The arrangement allows local traders to settle cross-border transactions without first converting their payments into dollars.
For China, the expansion of CIPS is about more than reducing transaction costs. Kai Xue, a Beijing-based corporate lawyer, said Beijing was gradually building 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.
Greater access to the system could also provide African countries with a degree of protection from the direct and indirect consequences of Western sanctions. Xue noted that countries can be affected by sanctions even when they are not themselves the targets.
He cited the example of Nigeria, which in 2022 was forced to purchase emergency supplies of Canadian potash after Western sanctions prevented it from importing fertiliser from Russia. In Mauritania, US sanctions reportedly prevented the country from purchasing boats from a Chinese company required to protect its Grand Tortue Ahmeyim offshore gas field.
Xue stressed that a yuan-based system would not replace the dollar in the near future. But he argued that it could give African countries a viable alternative for trade with China and other economies in the Global South, reducing their exposure to disruptions within the dollar-dominated financial system.
The implications could extend beyond payment infrastructure. Charlie Robertson, an economist focused on Africa, said China’s interest rates and currency movements would increasingly influence economies 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.”
Africa’s expanding use of the yuan therefore reflects the scale of its economic relationship with China as much as a deliberate effort to diversify away from the dollar. As more banks connect directly to CIPS, more trade is settled in yuan and more financial agreements are denominated in the Chinese currency, Beijing is gradually building an alternative financial network in one of the world’s most strategically important emerging markets.
