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NewsDay

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‘Chinese yuan will not improve economy’

Business
THE move by the government to introduce the Chinese currency the, renminbi or the yuan in 2016 under the multi-currency system, will have little or no effect to the economy, local economists have said.

THE move by the government to introduce the Chinese currency the, renminbi or the yuan in 2016 under the multi-currency system, will have little or no effect to the economy, local economists have said. BY TARISAI MANDIZHA

Zimbabwe could next year start using the Chinese yuan, as the Reserve Bank of Zimbabwe and Peoples Bank of China are finalising the modalities.

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In an interview with NewsDay Buy Zimbabwe chief economist, Kipson Gundani said Zimbabwe has a multiple currency system and the Chinese yuan is already part of it, but this move will have little impact, as consumers will always determine what is convenient for them, which at the moment is the United States dollar.

“I don’t see a scenario where the Chinese currency will become predominant in the economy. The Chinese yuan is already in our basket of multi-currencies and as long as we have a multi-currency system, consumers will determine. The effect is close to zero, as consumers will use the most convenient currency,” he said.

“I am not aware of other deliberate implications if we are to use the Chinese currency as part of our multi-currency system. It doesn’t matter which currency we have, but at the end of the day the rate will prevail, whether it’s the euro or the US dollar, the rate of the day and consumer choice will determine as well.”

Independent economist, John Robertson said the introduction of the Chinese yuan will not make much of a difference to the economy, as currently there is no money in the country. “I don’t think it will make much difference, we still need money and unless we start producing, we will still face challenges. Already there is a shortage of money in the economy and the introduction of the Chinese yuan won’t make much difference,” he said.

But central bank governor, John Mangudya told State media at the weekend that the use of the yuan in Zimbabwe would help minimise the exchange rate losses between the two countries.

He said the yuan would be promoted because of trade and investment that exists between the two countries and it was prudent to make sure that it was used alongside the US dollar. Zimbabwe adopted a multi-currency regime in 2009 to tame hyperinflation that had rendered the local currency worthless.

The currency basket has the South African rand, US dollar, British pound and Botswana pula, with the yuan being a recent addition.