Africa Is Quietly Saying Goodbye to the Dollar, Is Yuan the New King?

By Aksah Italo
Published on 01/29/26

One word was buzzing at the 2026 World Economic Forum Annual Meeting in Davos, Switzerland: “New World Order.” After decades of dominance, the United States appears to be ceding ground. Under the leadership of The Global Showman, President Donald Trump, sweeping and unconventional decisions have unsettled the old world order. “The old world order is not coming back,” Canadian Prime Minister Mark Carney told delegates.

One clear shift is China’s growing influence in Africa. For more than a decade, Beijing reshaped the continent with concrete and steel. Roads, railways, and power plants transformed skylines and balance sheets alike, financed largely in US dollars under the Belt and Road Initiative.

Today, as African nations grapple with high interest rates and shrinking access to capital, China’s influence is taking on a subtler, more durable form: currency. The Chinese yuan is steadily gaining ground across public finances, edging out the US dollar in tax payments, debt restructurings, and sovereign borrowing.

“Debt is inseparable from development, and China believes deeper investment is the way Africa resolves it,” said Du Xiaohui, director-general for African affairs at China’s foreign ministry.

What looks, at first glance, like a pragmatic response to a debt crunch may also mark a structural shift in how African economies are financed and by whom.

For cash-strapped governments, the appeal extends to Yuan financing being cheaper at a time when dollar borrowing has become prohibitively expensive. 

The trade-off is subtler and potentially long-lasting greater exposure to China’s financial ecosystem at a moment when policy autonomy is already constrained.

During the peak years of the Belt and Road Initiative, Chinese loans funded ports in Kenya, railways in Ethiopia and power plants across the continent.

China’s policy banks, notably the Export–Import Bank of China and the China Development Bank were once among Africa’s most enthusiastic financiers.

That era has ended. New Chinese lending has slowed to a trickle. By 2024, Beijing financed just six projects in Africa, a fraction of the volumes seen a decade earlier,showing that the debtor is being selective.

Rising defaults, mounting political scrutiny and economic pressures at home have forced a rethink.

In place of fresh lending, debt negotiation has taken centre stage. Currency conversion has become Beijing’s preferred tool, a way to stabilize repayments, preserve influence and advance the internationalization of the renminbi without expanding its loan book.

Zambia offered an early glimpse of this shift. Last month, Lusaka allowed Chinese mining companies among its largest taxpayers to settle tax obligations in yuan. The move is powerful. China is Zambia’s largest buyer of copper and its biggest bilateral creditor.

Accepting taxes in Beijing’s currency ties trade receipts, fiscal revenues and debt servicing into a single financial orbit.

Kenya has taken a bolder step. Last year, Nairobi converted part of its Chinese debt into yuan, restructuring roughly five billion dollars borrowed from the Export–Import Bank of China to finance the Standard Gauge Railway. The currency switch is expected to save more than 250million dollars annually in debt-servicing costs, a meaningful reprieve for a government under intense fiscal pressure.

Ethiopia is now in discussions to follow suit. In October, Prime Minister Abiy Ahmed opened talks with China president Xi Jinping to convert part of the 5.38billion dollars Ethiopia owes China into yuan-denominated loans. Ethiopia is seeking relief under the G20’s Common Framework after defaulting on one billion Eurobonds, and yuan conversion offers one of the few available pressure valves.

Together, these cases reflect a broader recalibration across the continent. Governments are not abandoning China; they are renegotiating the terms of engagement in a world where cheap dollars are no longer available.

For Beijing, the logic extends beyond Africa. The renminbi still accounts for less than two percent of global foreign-exchange reserves, far behind the dollar and the euro. But every loan conversion, tax payment or “panda bond” nudges the currency deeper into global circulation.

Africa’s trade patterns reinforce the strategy. China exported roughly 225billion dollars worth of goods to Africa last year, while African exports to China totaled a mere 123 billion US dollars.

Yuan-denominated debt also helps China manage its own risks. By shifting liabilities out of dollars, Beijing reduces exposure to dollar funding stress while anchoring borrowers more firmly to its financial system.

For African governments, the near-term benefits are tangible. Yuan-denominated sovereign and corporate bonds issued this year have carried yields of about 2.4 percent, roughly half the cost of comparable dollar debt. Kenya’s restructuring alone cut annual servicing costs by more than 215million dollars.

Economists see yuan conversion as a pragmatic tool that can cut costs and reduce dollar dependence, but stress that it isn’t a panacea. They see the benefits depend on robust reserve management, careful risk assessment, and broader strategies for export growth and fiscal stability. Without those, the short-term gains could be overshadowed by new vulnerabilities.

The appeal has spread beyond Africa. Sri Lanka is seeking the yuan equivalent of 500 million dollars for a highway project initially priced in dollars.

Yet currency substitution does not eliminate risk, it redistributes it. Africa’s total external debt stands at around 700bn dollars, with at least 11 countries owing money to China, several of them already in or near distress.

Repricing liabilities in yuan eases cash flow pressures but deepens dependence on a single creditor and currency.

The International Monetary Fund (IMF) in its commentary published two months ago warned that replacing dollar liabilities with yuan exposure can introduce fresh vulnerabilities, particularly for economies whose trade, reserves and payments systems remain anchored to the greenback.

“While these transactions may lower costs, they can also introduce currency risks depending on their structure,” an IMF spokesperson said, urging governments to embed such moves within broader debt- and reserve-management strategies.

There is also a structural constraint. Yuan-denominated loans require borrowers to hold larger reserves in China’s currency. For diversified exporters with strong trade links to China, that may be manageable. For smaller economies that earn little in yuan but still import fuel, food and capital goods priced in dollars, the mismatch could prove costly.

In effect, countries risk swapping one form of external vulnerability for another ,trading dollar liquidity risk for yuan concentration risk.

“China may sacrifice some interest revenue to broaden yuan use abroad. As Michael Pettis of the Carnegie Endowment puts it, “If the borrowers pay less, then the lender gets less… the benefit for China is that the renminbi becomes a more internationally used currency.”

This dynamic is partly driven by persistently lower Chinese interest rates compared with U.S. dollar financing, making yuan loans cheaper for African borrowers.

Africa’s yuan turn is not a rejection of the dollar, nor a wholesale realignment away from Western finance. It is a coping mechanism in a harsher financial world, a tactical response to tighter global liquidity, rising debt burdens and limited alternatives.