China’s Central Bank Digital Currency (CBDC) or digital yuan could serve as a valuable intermediary currency within the African Continental Free Trade Area (AfCFTA), which came into effect in January 2021.
This is according to Fintech and China expert Richard Turrin, author of ‘Cashless’ and ‘Innovation Lab Excellence’.
Turrin believes China’s CBDC will be used in trade between China and 140 countries which have committed to the Belt and Road Initiative (BRI) as at 1 January 2021 – forty of which are in Sub-Saharan Africa.
The BRI is a state-backed campaign to drive China’s global dominance through an infrastructure and investment plan worth over US$1.5-trillion over ten years. AfCFTA unites about 1.3 billion people in a US$3.4-trillion economic bloc.
The BRI connection to export manufacturing to Africa through the AfCFTA free trade area could see the CBDC being used within 54 of the 55 African Union (AU) states that had signed the agreement as of July 2019, with the exception of Eritrea.
Turrin explains that low-cost manufacturing is already leaving China for Vietnam, among others, and African countries are next on the list, adding that the BRI is building infrastructure to support trade with AfCFTA countries which are also reaching out to China for more as their largest trading partner.