An aerial view of the Yiwu International Trade Market in Yiwu, East China's Zhejiang Province Photo: VCG

A China-Africa cross-border yuan settlement center has opened in Yiwu, the world's largest wholesale market for small commodities, in East China's Zhejiang Province, according to Yiwufabu, the official WeChat account of the Yiwu government on Monday.

The move is expected to provide multi-channel clearing functions for China-African trading enterprises, reducing their exchange rate costs and risks and promoting China-Africa trade, experts and traders said.

The center will expand the cross-border yuan settlement business in Africa, strengthen the cooperation with branches of Chinese banks and financial institutions in Africa, establish cross-border yuan settlement channels and explore cross-border asset transfer and interbank purchases and sales, according to Yiwufabu.

The establishment of the center provides a more convenient settlement channel for economic and trade exchanges between Yiwu and Africa, with some traders expecting that yuan settlements will reduce exchange rate costs and rate risks amid a complex and volatile international situation.

"Settling with the US dollar in trade with Africa makes the collection of trade funds vulnerable to exchange rate fluctuations," a local foreign trade dealer surnamed Zhang told the Global Times on Monday, noting that she is using more cross-border yuan settlement in trading with African countries.

Liu Hongwu, dean of African studies at East China's Zhejiang Normal University, said that a lack of dollars was the single largest issue impeding the fast-growing trade between China and Africa during the past two years.

"As China-Africa trade has a large, strong base in goods and services, production capacity cooperation and industrial development, people now realize the possibility for the two trading partners to kick the dollar out of the foreign trade process," Liu said. 

Africa is Yiwu's largest trading partner, and there are nearly 2,000 African businessmen residing in the city. In 2022, Yiwu's total trade with Africa reached 84.02 billion yuan ($11.87 billion), up by 10.2 percent.

The platform will serve as a reservoir where exporters and importers can upload their products, with the value to be denominated in yuan, creating a new possibility for the yuan to serve as a hard currency and contributing to the yuan's internationalization process, according to Liu.

In recent years, the Yiwu government has been stepping up efforts to facilitate cross-border payments.

Yiwu launched a global payment platform called Yiwu Pay in February, facilitating more than 900,000 market entities in the city to connect to the world while reducing their payment risks.

Yiwu Pay has reached cooperation agreements with more than 400 banks and financial organizations across the world, with businesses covering more than 100 countries and regions and involving 16 major world currencies.

In 2022, cross-border yuan settlement in Yiwu reached 56.54 billion yuan, up 56.23 percent year-on-year, mirroring the momentum nationwide.
 
China's cross-border yuan payments posted steady growth in 2022. During the period, more than 4.4 million transactions were handled through China's yuan cross-border payment system, surging 31.68 percent year-on-year, according to the People's Bank of China, the central bank.

Liu expects that yuan settlements will continue to grow quickly for years to come.