Tanzanian bank rules out quick move for yuan clearing

The governor of the Central Bank of Tanzania, has ruled out the immediate possibility of setting up a clearing bank in the country for the Chinese yuan.

Kenya, South Africa and Tanzania have been widely reported to be interested in hosting the first yuan clearing house in Africa.

"We are not aware of efforts in place at this stage to establish an RMB clearing house in Tanzania," Professor Benno Ndulu told China Daily.

"However, we are aware that Kenya has started steps aimed at establishing a suitable RMB clearing arrangement there."

Kenyan President Uhuru Kenyatta visited China a year ago, when the idea of it hosting a yuan clearer was first proposed.

That possibility was seen as gaining considerable tract in May this year, after Chinese Premier Li Keqiang visited Nairobi.

Such a move would allow the settlement of trade deals, loans and aid in yuan without conversion to the dollar.

The move would also be a considerable boost to traders on both sides, as it would cut the costs they incur when converting from local currency to the yuan.

For Kenya, becoming the first to become a yuan clearing house is being seen as important in sending a political message on its deepening ties with the East and in its bid to turn Nairobi into the continent's business gateway to China.

Chen Fengying, director of the Institute of World Economic Studies at the China Institutes of Contemporary International Relations, said that allowing direct yuan transactions mitigates the risks of currency exchange loses.

"Though it will take time (for yuan) to become an international currency, China's economic growth certainly pushes the currency's ability to be used as reserve currency in future," she said.

She added that diversification of the currency is important since it reduces the risk during exchange and balances financial markets and business when other major currencies fluctuate heavily.

According to the China's Ministry of Commerce, total Sino-Tanzania trade volumes increased 45 per cent to $3.7 billion last year, the balance heavily in favor of trade from China with $600 million coming from Tanzania.

Tanzanians can already get quotes for their currency, the shilling, against the yuan.

At the end of last month, China's central bank, The People's Bank of China, said it plans to designate clearing banks for its currency in Paris and Luxembourg, as the two financial centers battle with London and Frankfurt to become the leading European offshore yuan-trading city.

Singapore and Sydney in Australia are also vying for a significant share of the global yuan market, which is expected to expand rapidly along with China's fast-growing economy.

For China Daily