Zimbabwe's newest legal tender: Chinese yuan

In exchange for $40 million in debt forgiveness from China, Zimbabwe will introduce the yuan as an official currency, one of many used since the country's own dollar collapsed under hyperinflation in 2009. 

Tsvangirayi Mukwazhi/ AP
Chinese President Xi Jinping and his wife Peng Liyuan feed an elephant at a game park in Harare, Zimbabwe during Xi's two-day state visit in early December. Zimbabwe has announced plans to make the Chinese yuan legal tender.

Zimbabweans will soon be able to shop with Chinese yuan, after officials agreed to a $40 million debt forgiveness plan with China: an increasingly dominant lender and donor across not just Zimbabwe, but all of Africa.

The agreement, which was announced by Finance Minister Patrick Chinamasa, will allow consumers to use Chinese currency. The yuan had previously been added to the government's basket of foreign currencies, but was not yet cleared for the public. 

Zimbabwe has begun phasing out its own dollars, which had become virtually useless after years of inflation so dramatic that the government stopped releasing exact inflation figures. In June, citizens were offered $5 USD for bank accounts worth up to 175 quadrillion Zimbabwean dollars, according to the BBC. 

For years, most Zimbabweans have been conducting everyday business using foreign currencies like the US dollar in an official multi-currency system. 

President Robert Mugabe has led the southern African country since it overthrew its minority white rulers in 1980. He is often blamed for Zimbabwe's economic woes, which left 8 out of 10 people formally unemployed in 2008.

Western economic sanctions over Mr. Mugabe's record of human-rights abuses have made trade difficult, pushing the President towards a "look East policy" well-timed with China's own eagerness to take on investment and development projects abroad.

In early December, Chinese President Xi Jinping and his wife Peng Liyuan spent two days in Zimbabwe en route to a China-Africa summit in Johannesburg, where he tried to reassure China's growing number of African partners over the Asian country's economic slump.

Mr. Xi and Mugabe's meetings resulted in ten agreements meant to bolster the Zimbabwean economy and infrastructure, adding on to years of Chinese investments. According to The New York Times, China now accounts for 82 percent of the country's foreign investments. 

While the two countries may be especially close, the financial ties are part of a decade-long trend. Chinese investment abroad grew "nearly tenfold" between 2005 and 2013, according to The Times, which observed a pattern of "lock[ing] up resources in countries with autocratic governments and struggling economies," making it "harder for Western-led institutions like the World Bank to demand economic reforms and environmental standards." Even Russia has strengthened economic ties with China after the conflict in Ukraine pushed European partners away.

From Ecuador to Afghanistan, China is stepping into similar industries as in Zimbabwe: mining, construction, and telecommunications. But its loans often come with strict conditions on natural resources and workers, as well as high interest rates.

"The problem is we are trying to replace American imperialism with Chinese imperialism," former Ecuadorian energy minister Alberto Acosta told the New York Times. 

Critics like Mr. Acosta worry that China will export not just goods, which can harm local businesses, but also create unhealthy labor conditions and environmental practices, as well as turn a blind eye towards human rights abuses — what made Zimbabwe a development pariah in the first place.

"Considering what has happened with past deals, we are skeptical of promises of big, megaprojects. We have had a lot of Chinese involvement before, but little improvement has happened," University of Zimbabwe economist Antony Hawkins told the Guardian of Mugabe and Xi's latest deal.

But others say there are signs that China and its partner countries are both waking up to the need for change.

One of the more dramatic signs could be China's pledge to give $2 billion to the world's poorest countries through a United Nations fund, possibly indicating greater willingness to play by the rules of Western aid. 

Journalist Howard French has reported that Africa's own consumers and civil society groups are pushing back against unclear terms in Chinese deals, demanding to know how they will benefit people outside government. 

In a 2014 op-ed, Mr. French argued that countries concerned with China's new dominance shouldn't point to individual leaders like Mugabe as the problem with such partnerships; most countries have signed deals with similarly notorious figures at some point. Instead, they can tackle the lack of transparency that often clouds such deals, and support civic institutions like the free press, or activist groups, who do the same.

of stories this month > Get unlimited stories
You've read  of  free articles. Subscribe to continue.

Unlimited digital access $11/month.

Get unlimited Monitor journalism.