Zimbabwe plans to adopt the Chinese yuan as legal tender in return for debt cancellation worth about $40m – a move one economist predicted “has no future at all”.
China has become the largest investor in Zimbabwe, which has been shunned by the West over its human rights record and is struggling to emerge from a deep 1999-2008 recession that forced the government to ditch its own currency in 2009.
Zimbabwe’s Finance Minister Patrick Chinamasa announced the plan in a statement on Monday and said the use of the yuan “will be a function of trade between China and Zimbabwe and acceptability with customers in Zimbabwe”.
Zimbabwe’s central bank chief John Mangudya was in negotiations with the People’s Bank of China “to see whether we can enhance its usage here”, according to the finance minister.
But Robertson suggested although China is active in Zimbabwe’s markets and economy, it does not want to sell goods there in return for Chinese currency.
“Nearly everything Zimbabwe can make it imports for a lot of money, and China wants to be a main supplier of these imported goods and would want to take the US dollar in return,” he said.
China-Zimbabwe relations date back to 1979 and the African country’s “Look East” policy has made China a strong ally in the market.
Relations were further improved when President Robert Mugabe was awarded China’s alternative to the Nobel Peace Prize in October for what the committee called his inspired national leadership and service to pan-Africanism.
Mugabe has placed great importance on Zimbabwe’s relations with China, especially after the 2003 standoff with the EU that resulted in the economic depression when the interest rate shot up to almost 600 percent.
“China is desperate for the consumer goods market, basically whatever anyone with the buying power can pay for.
“We can see evidence of that in the country all the time. But people accepting payment will want it in dollars – as opposed to yuan – and that will be very damaging to China’s interest here in Zimbabwe,” said Robertson.