Last December, Zimbabwe’s Finance Minister Patrick Chinamasa officially announced the use of the yuan, the Chinese currency, as legal tender for everyday transactions starting in 2016. The currency was already present in the country, as it was one of the nine foreign currencies authorized for exchange. According to him, the yuan “will be an effective trade instrument between China and Zimbabwe and will be accepted by Zimbabwean consumers.”
Record Hyperinflation
Since 2009, Zimbabwe has abandoned its national currency, the Zimbabwean dollar, in favor of foreign currencies such as the US dollar, the South African rand and Botswana’s pula. Following an economic collapse throughout the 2000s, caused by hyperinflation, Zimbabwe’s central bank continuously printed banknotes with increasingly higher denominations. Between 1999 and 2008, the country’s GDP fell by 45% and inflation reached historic levels: 1,000% per year until 2008, when it climbed to 500 billion percent according to the IMF.
As a result, in January 2009, one hundred trillion Zimbabwean dollar notes, worth the equivalent of 30 US dollars, were put into circulation. This currency became the weakest in the world and effectively unusable. Following this collapse, the adoption of the US dollar brought an end to inflation and helped stabilize prices.
Zimbabwe and China, Closer Than Ever
This announcement came just days after a visit from Chinese President Xi Jinping, who traveled to the country to sign several agreements, including the cancellation of a 40-million-dollar US debt and the promise of a one-billion-dollar low-interest loan. In recent years, China has become Zimbabwe’s leading trading partner, to the detriment of Western countries, as the international community has strongly criticized the human rights violations carried out under President Robert Mugabe.
The adoption of the yuan further strengthens China’s footprint on the international stage, especially just one month after the IMF integrated the yuan into its reserve currency basket for the first time in its history.
