Zimbabwe says China to cancel $40 million debt, increase yuan use

“China is now the most important local market for many worldwide banks because domestic issuance is likely to rise”, said Patrick Liu, the co-head of debt capital markets for Asia at UBS in Hong Kong. Those running Mugabeland live in a bubble of their own fantasy, History will judge these economic miscreants harshly.

Minister Chinamasa expressed his hope that allowing tourists to pay for services in Yuan would allow Zimbabwe to begin paying off their debt to the Chinese.

Zimbabwe, which has been isolated from the West over its human rights record, looks to boost trade with its largest investor through use of the yuan.

Chinese authorities have asked some banks to conduct test runs for longer trading hours for the onshore yuan, according to people familiar with the matter who asked not to be identified as the matter has not been made public.

This means trade in the yuan overlaps with business hours in Europe and Africa, where China is making strides in expanding use of its currency.

The Chinese yuan may soon become a legal currency in Zimbabwe after Beijing confirmed it would cancel the African country’s $40 million debt.

Read also: Prof John Stremlau: Ignore hype. Since then, the yuan depreciated around four per cent against the dollar, the largest five-month drop in over 20 years. Beijing has now finally provided a full list of the currencies against which it has been setting the value of the yuan for 10 years. It’s nothing new. What is different is the attachment to debts. Such a shift seems unlikely while doubts persist over China’s prospects for a smooth and orderly rebalancing, and while China retains widespread capital controls. “This is pretty meaningless as it stands”.

In early December, Chinese President Xi Jinping visited Zimbabwe and signed a great deal of agreements in economy and high technology with the President of Zimbabwe.

“There is no yuan circulating in the country”, said Robertson.

After China lowered the threshold for companies to issue bonds and allowed more foreign companies to buy Chinese bonds, bonds issued in the first 11 months of 2015 totalled 19.9 trillion yuan, up 81.6 percent from a year ago. “So it’s a unusual situation now as the yuan has no future at all”. Wang Tao, chief economist in China at UBS, said: “Foreign central banks and sovereign wealth funds are expected to increase investment in renminbi assets when it becomes one of the global reserve currencies, which requires more reform measures to prevent potential risks”.

“The PBOC may want the yuan to fluctuate two ways, instead of just weakening”, said Irene Cheung, a currency strategist at Australia & New Zealand Banking Group Ltd in Singapore.

The reason may partly be that China is one of the largest exporters in the world, so changes in the Chinese exchange rate could cause major shock waves. China has since always been investing in Zimbabwe as western countries have remained aloof.