China's Crypto Advantage: Yuan's Growth in Africa & Diminishing US Debt

• US Dollar's Rising Value Poses Concern for African Nations
• China Sees Opportunity with the Chinese Yuan in Africa
• China Promotes Use of Local Currencies in Africa
• Fed's Influence to Decrease, People's Bank of China's Relevance to Increase

US Dollar's Rising Value Poses Concern for African Nations

The increased value of the US dollar is causing unease among African nations, as their ability to repay their debts is being hampered. As the US dollar's value rises, these countries face the requirement of disbursing a larger sum for debt repayment, causing a deficit. For those unfamiliar, a trade deficit transpires when a country's imports exceed its exports within a fiscal year.

China Sees Opportunity with the Chinese Yuan in Africa

Despite the challenges presented, BRICS member China is leveraging this situation by promoting the use of the Chinese Yuan over the US dollar in Africa. This currency substitution could be beneficial for Africa, as the Chinese Yuan is a cheaper option for debt repayment compared to the US dollar. This scenario benefits BRICS countries who have initiated the de-dollarization process.

China Promotes Use of Local Currencies in Africa

China, a member of BRICS, is advocating for the use of local currencies such as the Chinese Yuan instead of the US dollar in Africa. The issuing of 'Panda' bonds, which are renminbi-denominated, to African nations by China is part of their de-dollarization strategy. This move could assist African countries in debt repayment and promote the replacement of the US dollar with the Chinese Yuan to safeguard their interests.

Fed's Influence to Decrease, People's Bank of China's Relevance to Increase

Charlie Robertson, Head of Macro Strategy at FIM Partners, conveys that the Federal Reserve's influence will slightly decrease in the future while the People's Bank of China's relevance will increase. He believes that Africa is on the verge of a pivotal transition and foresees the potential of these nations adopting the Chinese Yuan. He is confident that China will advocate for more trade and debt to be issued in its currency, especially given the current lower interest rates in China compared to the US.

Trading with the yuan makes perfect sense for African countries when dealing with their largest trading partner, he concludes. The impact of BRICS abandoning the US dollar for trade could affect various sectors in the US.

Edited by Jonathan Stoker