On Wednesday, the Kenya Bankers Association (KBA) announced that the Chinese currency, the yuan, is becoming more popular among commercial lenders because of the increasing trade between China and Kenya.
Habil Olaka, the CEO of KBA, said in Nairobi, Kenya’s capital, that the yuan is becoming another option, besides the U.S. dollar, for handling money matters related to trade between Kenya and China.
“What tends to happen between two countries trading is that they use a currency that is readily available in their countries,” Olaka said on the sidelines of the launch of the 2022 Kenyan Banking Sector Total Tax Contribution study by the KBA.
In 2020 Kenya’s total merchandise trade volume amounted to $21 billion or 21 percent of GDP. More than 16 percent of this total is from trade with China (the country’s top trading partner), followed by the EU ($2.9 billion), India ($1.8 billion), and the United Arab Emirates (UAE) ($1.2 billion). The United States (nearly $1.0 billion) is Kenya’s fifth-largest trade partner.
Olaka also mentioned that many commercial banks now offer a way to trade yuan, making it easy to access the Chinese currency in Kenya. He pointed out that using the right currency is very important for increasing trade between the two countries. He explained that Kenyan banks are adopting the yuan for trade with China because it saves money by avoiding the need to change currencies into U.S. dollars.
He shared that most banks in Kenya have set up special departments for Chinese customers, aiming to support the increasing number of Chinese businesses in the East African nation.
As Sino-Africa ties continue to outperform, several African central banks are applying to the Chinese Central Bank for currency swap, which is the exchange of a loan in one currency for another and the placing of a share of their reserves in the renminbi (RMB), or the yuan.
According to Swift RMB Tracker, the RMB is already being transferred over Swift by more than 1,000 banks in 85 countries. Swift, or Society for Worldwide Interbank Financial Telecommunication, is a global transfer system used by companies for financial transactions. Recent data by Swift shows that the growth in the use of the RMB in traditional trade finance has propelled the RMB to the second most used currency in the market.
In January 2022, China and Kenya signed six bilateral trade agreements that focused on removing tariffs and other trade and nontrade barriers. These agreements promised access to China’s large market for Kenyan exporters and included protocols to facilitate bilateral trade, especially exports of avocados and aquatic products.
The two countries agreed to collaborate on Information Communication and Technology (ICT) to boost digital economy in Kenya, continue in the development of regional transport for economic hub on Belt and Road Initiative (BRI) and creating market of Kenyan agricultural products. In August 2022, Kenya became the first African country to export fresh avocados to China.
According to Kenya National Bureau of Statistics, the country’s total exports to China reached 27.5 billion shillings (about 192 million dollars), while imports from China hit 3.17 billion dollars in 2022. Government data indicated that China has become the largest trading partner, foreign investor and project contractor of Kenya.
China has remained Africa’s largest trade partner since 2009.
Do you have any story or press releases you want to share? Send tips to editor@envestreetfinancial.com
Follow us on Twitter, Facebook, or LinkedIn to ensure you don’t miss out on any