Thousands of Kenyan traders and exporters may increasingly use the Chinese yuan rather than the U.S. dollar as commerce between Kenya and China grows, a shift economists say could offer new support for the Kenya shilling.
The change follows China’s decision to eliminate tariffs on imports from 53 African countries starting May 1, a move expected to speed up trade between African economies and the world’s second-largest economy.
Analysts say wider use of the yuan for trade settlements could lower demand for the U.S. dollar among Kenyan importers and exporters, easing pressure on the foreign exchange market and strengthening the local currency.
The Kenyan shilling has stayed relatively steady in recent months and was trading at about Ksh129.55 against the U.S. dollar on Thursday morning, with the Central Bank of Kenya (CBK) forecasting continued stability.
Reuters reported that rising trade between China and African countries is expected to boost yuan-denominated transactions, especially as more exporters seek direct settlement in the Chinese currency instead of converting funds through the dollar first.
Kenyan businesses have already begun adopting the shift.
A local international bank in Kenya said it has started issuing yuan-denominated letters of credit, allowing local firms to deal directly with Chinese suppliers without unnecessary currency conversion.
“We see it as complementary,” the bank’s chief executive told Reuters, adding that the yuan is not expected to replace the dollar but could become an increasingly significant currency for trade between Africa and China.
The move comes as Kenya strengthens economic links with China, which remains one of the country’s biggest trading partners and a major provider of infrastructure financing.
Last year, Kenya converted three Chinese railway loans from dollars into yuan, a step estimated to save the country about Ksh27.8 billion annually in interest costs.
China’s expanding role in Kenya’s export market is also expected to encourage yuan adoption. Products such as avocados, tea, coffee, macadamia nuts, and avocado oil are increasingly entering Chinese markets after the removal of tariffs.
Avocado exports to China have risen from between 10 and 20 containers a week in 2022 to about 200 containers at present, with industry players projecting volumes could reach 1,000 containers weekly by 2030 after China lifted tariffs.
The growing use of the yuan comes as the Kenya Shilling Overnight Interbank Average (KESONIA) remains aligned with the benchmark Central Bank Rate of 8.75 percent, helping sustain confidence in the local currency.
The shilling’s outlook could receive further support from easing geopolitical tensions in the Middle East after a ceasefire agreement.