Ethiopia and Kenya have become the first African countries to adopt yuan-based debt-swap arrangements, seeking to alleviate the burden of their dollar-denominated debts.

This move reflects a growing demand for the Chinese yuan in Africa to avoid foreign exchange losses and transaction costs.

Professor XN Iraki with the University of Nairobi and Zhou Mi, Senior Research Fellow at the Chinese Academy of International Trade and Economic Cooperation, dissect this trend and its implications.

A pragmatic shift for Africa

For Professor Iraki, the Kenyan case is a pragmatic one. The headlines about converting dollar-debt into yuan are about economics.

"The main reason why this was done is to make sure that it's cheaper," Iraki stated. "The interest rate in yuan is cheaper than the interest rate in dollars. So we see that as very positive for repaying our debts."

Beyond debt, the benefits extend to trade and travel. Iraki shared a personal anecdote about the inefficiency and cost of converting Kenyan shillings to U.S. dollars and then to Chinese yuan for a trip to Beijing. He envisions a future with direct convertibility.

"If we can now convert shillings into yuan directly, trade would be fair to deal with, and traveling would be easier. As traders, we want choices."

Credibility and trade volume

Zhou Mi echoed the short-term interest rate advantage but emphasized that the shift is driven by longer-term factors: the credibility of the yuan and the sheer volume of China-Africa trade.

"China's government is very firm to open our market. We stick to these principles of doing business with our friends," he said, highlighting a key perceived advantage. As the world's top trader in goods, China offers a massive market, and using the yuan streamlines transactions for its largest partners.

CIPS: Building an alternative financial infrastructure

A critical enabler of this shift is the Cross-border Interbank Payment System (CIPS). Zhou Mi explained that CIPS is not designed to replace systems like SWIFT but to offer a choice.

"It's a kind of mechanism to help the different stakeholders around the world to settle transactions," he noted, adding that the system now links over 1,600 financial institutions across 120 countries. This provides a vital channel for direct, bilateral settlement that mitigates foreign exchange risks.

Both experts point out as China opens its market with zero tariffs for 53 African countries, the incentives to use the yuan will only grow. This trend is not just reshaping China-Africa relations; it is actively redefining Africa's role in the global financial system, offering a new currency of choice in a multipolar world.