The Chinese Yuan is experiencing a surge in popularity among commercial lenders as traders prefer the yuan to the dollar, which continues to experience shortages.
According to Habil Olaka, the Chief Executive Officer of the Kenya Bankers Association, who spoke with Chinese publication Xinhua, flourishing Sino-Kenya trade relations have spurred trade between the two countries. Kenyan traders prefer the readily available yuan for trade settlements between Kenya and China.
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As a result of the currency’s growing popularity, most commercial banks in Kenya now offer yuan trading facilities to facilitate businesses engaging in cross-border transactions. This shift towards the yuan has proved advantageous for bilateral trade, as it eliminates the need for the U.S. dollar, ultimately reducing transaction costs for traders and businesses.
Olaka said that Kenyan banks have quickly embraced the yuan and established ‘China’ desks for easy interaction and transacting.
As the yuan gains further traction in Kenya’s business and financial activities, it is also opening up new opportunities for investors and traders alike, paving the way for a promising future in the ever-evolving global economic landscape.
Foreign exchange reserves are crucial in facilitating government payments, particularly for servicing external debts and acquiring essential imports. As a result, the Central Bank of Kenya (CBK) maintains foreign currency reserves, comprising major currencies such as the US dollar, euro, Japanese yen, and others, to serve as a safety net and buffer against potential economic uncertainties.
Predominantly denominated in US dollars, these reserves act as contingency funds in unlikely emergencies, such as a devaluation of the Kenyan shilling. The ongoing dollar shortage that has hit Kenya and other East African nations has catalysed conversations on easing off the dollar into other global currencies for ease of trading.