China Claims Currency Victory in Zambia, but Yuan Internationalization Remains a Myth
Udumbara
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Zambia’s limited acceptance of yuan payments for mining taxes is being promoted by Beijing as a currency breakthrough, but the move reflects debt management and cost efficiency rather than genuine de-dollarization.
The country has refused to implement a dual-currency system for everyday use and has agreed to accept only narrowly defined payments in yuan, while holding relatively small amounts of the currency in its reserves. There is no evidence that this arrangement represents meaningful de-dollarization or that the yuan is becoming a preferred international currency, let alone one capable of displacing the U.S. dollar.
Zambia has become the first African country to officially accept mining tax payments in yuan. However, according to National Planning Minister Situmbeko Musokotwane, only 15 percent of mining taxes will be paid in yuan, while 60 percent will continue to be paid in U.S. dollars, and only a small number of Chinese-owned companies are participating in the pilot program.
This limited shift in currency use underscores the strategy behind the CCP’s Belt and Road Initiative and reinforces accusations of debt-trap diplomacy. If Zambia believed the yuan was a better currency than the dollar, it would already be accepting most or all payments in yuan. It would also replace dollar reserves held by its central bank with yuan. Zambia’s decision to accept limited yuan payments has nothing to do with confidence in the yuan as a superior currency, but rather with reducing the cost of servicing its external debt to China.
In addition to providing Beijing with bragging rights over yuan internationalization, the use of the yuan also reduces transaction costs, thereby making natural resources cheaper for China. The change eliminates multiple currency conversions that previously increased costs. To facilitate the shift, the Bank of Zambia began publishing an official yuan-kwacha exchange rate in late 2025, integrating the currency more directly into its payment and accounting systems.
Furthermore, the agreement is limited to payments made by companies operating in Zambia, rather than to direct transfers from the Chinese regime. The adjustments affect debt-servicing mechanics but do not alter Zambia’s broader trade or reserve currency framework. The policy does not introduce a dual-currency system for domestic use, as the Zambian kwacha remains the sole legal tender for retail transactions, wages, and everyday commerce.
Similar shifts are evident elsewhere in Africa, following Kenya’s decision to service its Chinese debt in yuan and Ethiopia’s negotiations with Chinese lenders regarding partial currency swaps. Taken together, these cases suggest a limited but growing normalization of yuan-denominated transactions in countries with high exposure to Chinese trade and debt.
A currency swap requires each country’s central bank to hold equal amounts of the other country’s currency, valued at market exchange rates on the day the swap is executed. When trade is settled, the currencies are swapped directly rather than exchanged on open markets. Such arrangements are typically limited in scope because the funds involved must be set aside and cannot be used for other purposes. This constraint explains why most African countries maintain relatively small swap lines with China, typically under $2 billion to $3 billion.
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Currency swaps also do not constitute expanded acceptance of the yuan, since countries such as Zambia receive payments in their own currency rather than in yuan. In practice, these swaps function as an accounting bypass. If Zambia uses a swap to pay for a Chinese infrastructure project, the yuan never circulates within the broader economy, moving instead from the Bank of Zambia directly to a Chinese contractor’s account in Beijing.
Beijing is amplifying claims that the yuan, including through currency swap deals with other central banks, now accounts for 8.5 percent of global currency transactions, up from 7 percent in 2022. However, this does not represent a trend of broader yuan acceptance. Russia alone accounts for a large share of this activity, and even the Kremlin remains hesitant to accept the yuan, using it largely out of necessity after being cut off from international trading platforms that operate in dollars. The figure also includes currency swaps, which, as explained above, do not equate to true yuan acceptance. As a result, the actual percentage of trade settled in yuan outside of Russia is significantly lower.
In short, the CCP has been able to pressure a small number of client states into accepting limited amounts of yuan for narrowly defined trade, but the U.S. dollar remains the global currency of choice, and there is no indication that this is likely to change anytime soon.
