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Inside China 05 February 2026

Redback rising, and rising

Jeremy Stevens

  • Trade settlement has been the easiest win for RMB: nudged exporters, export-tax rebates and CIPS rails lifted China's merchandise share from 15% in 2021, to 33% in 2025, and the Africa corridor from 0.3% to over 25% in 15 years. Portfolio and FDI totals have quadrupled since 2020, yet the yuan's slice of world capital flows remains meagre; this gap is exactly what theory predicts for a currency convertible for goods – but it is only cautiously open for capital.
  • Chinese policymakers have made progress in building the institutional backbone for RMB's broadening: 40 PBoC swap lines (RMB 4 trn), 29 offshore clearing hubs, live CIPS in 110 countries, 6 Bond/Stock Connect channels, Panda-bond window in Shanghai, e-CNY pilot in 26 cities, and ICBC/BOC nostro rails from Lagos to Lima—enough plumbing to move trillions in RMB a year, but without touching the dollar.
  • However, the commercial benefit from using RMB has lagged (and therefore the motivation to use it); it has been thinner than otherwise would have been the case. Sure, mBridge, Panda bonds and CIPS cut headline fees and bundled costs, yet once CNH bid-offer spreads, onshore/offshore liquidity splits and political-risk premium are priced in, corporates pocket only a marginal net saving. Thus, many treasurers still prefer the deeper, predictable dollar pool. Much has depended on expectations around the relative trajectory of CNY/USD – periods of CNY strength have been more favourable.
  • Chinese policymakers sometimes deploy counter-cyclical stabilisation tools subject to an uncertain undulation in the hierarchy of priorities—where stability can instantly outrank liquidity. However, the very optionality, that may unsettle foreign savers, is the safety valve that manages capital flight, bank stress and/or geopolitical shocks. The result is a contingency currency and a controlled-release scheme that offers just enough offshore liquidity to settle trade and lure hard-currency inflows – but never so much that holders can stage a run on the closed mainland account.
  • Africa's rational response is to treat the half-open gate as a time-limited discount coupon—issue, invoice and invest in RMB today, before China's swing from creditor to borrower narrows the bargain and everyone else simply pays more for the same ride. The winners—those already issuing Panda bonds, invoicing in CNY and building deep RMB liquidity—will morph from price-takers to gatekeepers; the rest will watch the discount expire. 
  • Structural drivers now point to a rapid widening of the yuan's African footprint.  Beijing's leverage has been cemented by a string of successes: PBoC swap lines that Nigeria, Egypt and Ghana draw on to pay for wheat, solar panels and fertiliser whenever dollars dry up; policy-bank loans that hit USD30.5bn in contract signings in H1:25 – five times the 2024 outcome; and the BRICS New Development Bank's maiden RMB4bn sovereign credit to Egypt proved that yuan paper can undercut hard-currency benchmarks.
  • Commercial ties are deepening just as fast: Chinese exports to Africa grew 26% in 2025, the fastest pace since the 2022 reopening rebound, while 60% of new Chinese greenfield projects now budget at least part of their EPC contracts in yuan, up from 12% in 2020. Worker remittances entrench the currency, and the Yiwu–Africa Settlement Centre clears RMB6bn of small-ticket trade annually, same-day through CIPS.
  • Commodity pricing power provides rocket-fuel: when Sonangol or Zambia's Mopani quotes crude or copper in yuan, every refiner, insurer and reserve manager down the chain must stock CNY, instantly deepening offshore liquidity. 
  • Cheaper capital seals the case: Kenya's Kipeto wind-farm refi cut 110 bps off the dollar cost, while Lagos-Calabar railway contractors undercut dollar bids by 6% simply by removing the FX-mismatch buffer. 
  • For banks the game is ancillary flow: RMB call accounts for Mombasa tea growers, deliverable forwards for Cape wine exporters, repo lines for Angolan Panda bonds. The margin lies in cash-management and cross-listings, not the FX ticket—miss the shift and you fight over shrinking dollar fees while rivals originate yuan assets at fifty times the volume.
 

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