Africa-Press – Zambia. With China’s seeming insatiable appetite for foreign investment and trade running into billions, it’s unsurprising that its national currency must be adopted to settle transactions.
It ll certainly reduce transaction costs that normally come with converting the US dollar into yuan when Zambia is trading with China or settling foreign debt between the two countries.
Perhaps it might incentivise more Chinese investors who might see the cost of doing business going down because they don’t need to convert the yuan into the US dollar in order to invest in Zambia.
It’s not guaranteed but certainly a possibility. I mean, you need more than just accepting Chinese yuan in tax payments to attract Chinese investment.
But other than the potential economic benefits for Zambia, this decision unintentionally serves as a diplomatic response to the Trump Administration’s recent moves against Zambia such as the suspension of visas to Zambian travelers in what the country is calling a partial travel ban.
The decision to accept payment in yuan lessens dependence on the US dollar.
There’s a very good chance that several other countries may follow Zambia’s example thus further threatening to upset the US dominance in the global financial sector.
The US dominance in this space has helped prop up its global economic hegemony, a status it guards so jealously, it could go to war or threaten war to protect it.
Already, many other nations are slowly adopting the Chinese rival to SWIFT – CIPS.
This is the Cross-border Payment System which settles international payments in yuan.
The advantage is that transactions are settled in real-time – within seconds as opposed to the SWIFT system that takes days.
Transactions in the SWIFT system are largely dominated by the US dollar due to the US dominance in global trade.
But while all these moves are happening, the US dollar is not about to lose its dominance.
This is because the US buys a lot of stuff from a lot of countries. For most countries, the US remains their major trading partner.
This is why the imposition of tariffs by the Trump Administration has been such a huge thing for everyone.
So, strategic though the Zambian move might be, the US couldn’t care less but certainly would pay attention.
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