What You Need to Know
Zambia has become the first African country to accept the Chinese yuan for mining taxes, starting in October. This move reflects China’s growing financial influence in Africa, particularly in the mining sector, as Zambia aims to diversify its reserves and manage its debt more effectively. Chinese mining companies are already settling tax obligations in yuan, aligning with Zambia’s copper exports.
Africa. Zambia has officially adopted the Chinese yuan for mining taxes, starting in October. This makes it the first African country to accept the currency in the mining sector, reflecting China’s growing financial influence in one of the continent’s most strategic industries.
The Bank of Zambia confirmed that Chinese mining companies have already begun settling part of their tax obligations in yuan, aligning with the reality of its exports, as China is the largest buyer of Zambian copper and one of the country’s major creditors. The central bank stated that this move is part of a strategy to manage reserves and aligns with the realities of foreign trade, noting that “a significant portion of copper exports goes to China, and Chinese companies are already receiving their payments in yuan.”
The Zambian central bank views diversifying and building reserves as a primary goal, and purchasing yuan helps achieve this aim while also reducing the cost of servicing Chinese debt. It added that adopting the Chinese currency “allows Zambia to service its debts to China more cost-effectively.”
Africa: A Testing Ground for Chinese Influence
This step comes as Beijing expands efforts to increase the global use of its currency, with Africa serving as a key testing ground for this strategy. In October, Kenya converted part of its Chinese debt into yuan to alleviate pressure on its public finances, expecting to save about $250 million annually after restructuring a $5 billion loan from the Export-Import Bank of China.
Ethiopia has also begun similar discussions, while Zambia has previously indicated the possibility of following suit regarding part of its debts.
To facilitate this transition, the Bank of Zambia began publishing an official exchange rate between the yuan and the local currency, the kwacha, last month, allowing mining companies the option to pay taxes in either dollars or yuan. This follows regulations established in 2018 and expanded in 2020, which required mining companies to sell foreign currencies to the central bank to support the country’s reserves during a debt crisis.
Observers note that accepting the yuan in Zambia’s mining sector reflects a shift in Chinese influence from resource control to solidifying the presence of its currency at the heart of African economies, a move that could pave the way for other countries to adopt similar policies.
Zambia, the second-largest copper producer in Africa, has been exploring ways to manage its debt and stabilize its economy. The adoption of the yuan for tax payments is part of a broader strategy to strengthen financial ties with China, which is a major buyer of Zambian copper. This shift comes amid a growing trend in Africa, where several countries are considering the yuan as a viable alternative to traditional currencies for international trade and debt management.
