A clearing center for the Chinese currency renminbi (RMB), or the yuan, in Mauritius, will facilitate trade transactions between Mauritius and China, and help strengthen economic ties between Africa and China, a business leader told Xinhua in a recent interview.
Mauritian Finance Minister Renganaden Padayachy, during his presentation of the 2022-2023 budget in June, said that a regional renminbi clearing center was expected to be set up in Mauritius by the end of the year.
Kwang Poon, chairman of the Economic Council for Africa Europe Asia (CECOAFREA), an association bringing together businessmen and promoting trade, said the center will allow import and export invoices to be paid using the currencies of the two countries directly.
“Today, if you import from China, the invoices are usually denominated in USD and not in RMB. Similarly, if you export to China, you invoice in USD or EUR, but not in Mauritian Rupees (MUR). With the RMB Settlement Center coming into operation, these cross-border transfers could be done without using an intermediate currency,” said Kwang Poon.
To achieve this, the two countries must first sign a Currency Exchange Agreement based on the volume involved. Then a pilot project can be launched to implement the Cross-Border Interbank Payment System, also known as the China International Payments System, he said.
Kwang Poon believed that for Mauritius, which is positioning itself as the International Financial Center in the African region, the RMB Settlement Center is a step toward consolidating and diversifying the financial services offered by streamlining cross-border transfers which will become faster and cheaper.
The expert pointed out that apart from facilitating Mauritius-China business transactions, the center will also make a positive impact on economic relations between Africa and China, which saw bilateral trade exceed 254 billion U.S. dollars in 2021, up 35.3 percent year on year.
Therefore, the RMB Settlement Center will really deliver on its promise if it has a regional reach by extending to the African continent, he said.
Mauritius is well placed for the role of intermediary between Africa and China, Kwang Poon said, because following the 22nd meeting of the Eastern and Southern Africa Anti-Money Laundering Group, which ended on Sept. 1, Mauritius is now recognized as one of the few international financial centers that are compliant or largely compliant with all the Financial Action Task Force’s 40 recommendations.
“If we look further and incorporate fintech and cryptocurrency on this platform in the future, it will make trading even easier,” he said. “With the rise of China, as of 2016, the Chinese yuan joined the U.S. dollar, the European Union euro, the Japanese yen, the British pound in the basket of currencies making up the International Monetary Fund’s Special Drawing Rights.”
“This underlines the importance of China’s place in international trade. This trend will continue to grow and China intends to promote the internationalization of its currency, the RMB,” he said.