Zimbabwe Makes Chinese Yuan Legal Tender

Chinese President Xi Jinping talks with Zimbabwean President Robert Mugabe on arrival for a state visit in Harare, Zimbabwe December 1. Zimbabwe is to make the Chinese yuan legal tender after Beijing canceled $40 million of Zimbabwean debts. Philimon Bulawayo/Reuters

Zimbabwe is adding the Chinese yuan to its list of acceptable currencies after Beijing agreed to cancel $40 million of debts owed by the southern African country, AFP reported.

Zimbabwean Minister of Finance Patrick Chinamasa announced the debt cancellation on Monday, and that Zimbabwe was in the process of making the yuan legal tender. The southern African nation is heavily dependent on Chinese investment and shares a close relationship with Beijing. Chinese President Xi Jinping visited Zimbabwean President Robert Mugabe in Harare in December, prior to a regional summit in South Africa, overseeing the signing of 10 agreements between the two countries, including more than $1 billion of Chinese investment in Zimbabwe's largest thermal-power station.

China is one of Zimbabwe's main trading partners: in 2014, China was Zimbabwe's main export destination, with more than a quarter of exports heading to Beijing, while 8.8 percent of Zimbabwean imports came from China, second only to neighboring South Africa.

Zimbabwe has run a multi-currency economy since abandoning its own dollar in 2009 due to hyperinflation and already uses foreign currencies including the U.S. dollar, the South African rand and the Botswanan pula. The Chinese currency is not currently approved for public transactions in Zimbabwe; Chinamasa said that use of the yuan "will be a function of trade between China and Zimbabwe and acceptability with customers in Zimbabwe," according to AFP.

Mugabe, who has been president of Zimbabwe for more than 35 years, adopted a pro-Beijing trade policy after his country was isolated by former Western trading partners over alleged human-rights abuses. The veteran Zimbabwean leader was awarded China's Confucius Peace Prize—an award not affiliated to the government in Beijing but which has been dubbed as China's version of the Nobel Peace Prize—in October for "injecting fresh energy" into efforts for world peace and African unity.