In an unprecedented move that signals China’s growing global influence, Zimbabwe has announced that it will adopt the Chinese currency as legal tender as it seeks to increase trade with Beijing.
By GEOFFREY YORK (theglobeandmail.com)
The announcement came after China cancelled $40-million (U.S.) in Zimbabwean debt earlier this week. China is already Zimbabwe’s biggest trading partner, and Beijing is often praised by the Zimbabwean government which has adopted a “Look East” policy after years of sanctions by Western governments.
While the decision to adopt the Chinese yuan as legal tender next month is largely a political message by an anti-Western government, it also illustrates China’s economic power in Africa, where Beijing has rapidly become a major investor and the continent’s biggest trading partner.
Zimbabwe abandoned its own currency in 2009 after a spectacular bout of hyperinflation, climaxing with the printing of banknotes in denominations of 100-trillion Zimbabwean dollars, which could barely cover the cost of bus tickets for a week.
The government finally stabilized the hyperinflation crisis by adopting foreign currencies – mostly the U.S. dollar and South African rand – as legal tender. This boosted the economy, but it rankled some Zimbabwean officials, who resented U.S. sanctions on their county. The rand, meanwhile, has been shaken by the sharp decline of its value in recent months.
Under the new policy, the U.S. dollar is likely to remain the most popular currency, but the yuan would become an alternative, primarily among Chinese tourists and traders at first.
[The original article (Copyright 2015 The Globe and Mail Inc. All Rights Reserved) was written by GEOFFREY YORK (theglobeandmail.com) and is presented here by the editorial team of munKNEE.com (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (see sample here – sign up in top right corner) in a slightly edited ([ ]) and abridged (…) format to provide a fast and easy read.]
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