The People's Bank of China has recently authorized the Standard Bank of South Africa Limited and the Industrial and Commercial Bank of China Limited to jointly serve as the RMB Clearing Bank for Africa, thereby establishing a cross-border RMB settlement corridor covering 19 African countries. 

The China-Africa Cross-Border RMB Center, located in the Yuhua Block of the Changsha Area of the Hunan Pilot Free Trade Zone (FTZ), leverages this national-level financial infrastructure to transform the dividends of institutional innovation into practical actions that serve the real economy.

Previously, most African countries had to route cross-border RMB settlements through clearing banks or correspondent banks in other regions, which was time-consuming and incurred multiple layers of exchange losses. "In the past, our biggest concerns when doing business with Africa were slow capital repatriation and unstable exchange rates," said a manager of an agricultural machinery exporter located in the Yuhua Block of the Hunan FTZ.

Thanks to the launch of joint RMB clearing operations of ICBC and Standard Bank of South Africa, the China-Africa Cross-Border RMB Center fully utilizes its "at-your-doorstep" advantage, effectively extending the financial corridor to enterprises' doorsteps. The center rolled out the "Global Pay Africa Service" financial service program in Hunan, offering payment management services under cash management for multinational enterprises in the African regions covered by Standard Bank of South Africa, in a more autonomous, secure, efficient, and convenient manner. At the same time, it promotes the implementation of "China-Africa Direct Remittance," enabling cross-border straight-through remittances without routing through correspondent banks outside the system. This significantly reduces costs and speeds up funds arrival.

The rollout of the national-level clearing channel builds on continuous regional trials. In 2021, the China-Africa Cross-Border RMB Center took the lead in piloting direct trading between RMB and six African currencies, including the Kenyan shilling, Nigerian naira, and Zambian kwacha. It also launched corporate spot foreign exchange settlement and sales services for South Africa and several other African countries. "Every innovative step we take provides a practical model for the national clearing network," said a person in charge at the center. From the first China-Africa direct RMB remittance connection, to the first blockchain-based letter of guarantee nationwide, and further, to the recent launch of joint clearing bank, the Yuhua Block of the Hunan FTZ has been pioneering and experimenting, opening up channels for China-Africa capital flows and exploring feasible pathways for the broader use of the RMB in Africa.

The China-Africa Cross-Border RMB Center offers services across the full transaction chain. According to the center, enterprises in the Yuhua Block can not only handle cross-border settlements, but also access a comprehensive suite of financial services, including import prepayment financing, export letters of credit, and cross-border two-way RMB cash pooling.

This article is from Hunan Provincial Government. www.enghunan.gov.cn.

Translator: Pang Yuehui

Chinese source: hunan.gov.cn