Business
Kenya looking to host Africa’s first yuan clearing house – to cut need for dollar settlements
Kenya’s central bank governor, Njuguna Ndung’u, told reporters on Wednesday that foreign exchange values could rise with such a clearing house, as it would be designed to serve trade and payments settlements for the east and central African region.
A clearing house will allow the renminbi currency, of which yuan is the unit, to become a common settlement currency, and could in future be used for official flows such as bilateral loans or aid now denominated in dollars, experts said.
That means there would be no need to settle in dollars when trading between the Kenyan shilling or African currencies and the yuan, which in the medium to long term reduces the cost of business on between African countries.
Highlighting Nairobi’s enthusiasm for a clearing house based in Kenya’s central bank, President Uhuru Kenyatta made his bid for Beijing’s backing during a visit to China in August.
Business between Kenya and China is growing, even if Europe is still a bigger trade partner. Kenya’s Equity Bank, for example, has opened a branch in Nairobi for Chinese business executives.
“Everyone is trying to clinch a deal to directly clear and settle yuan transaction with the People’s Bank of China,” said an official at a Chinese state think-tank that often advises Beijing on policy, speaking about Africa’s clearing house plans.
Settling in yuan on the continent would mirror developments in Asia, where there are already yuan clearing houses in Singapore, Taiwan and the Chinese territory of Hong Kong.
