Angola Adds Chinese Yuan to List of Approved Reserve Currencies

Angola's central bank has added the Chinese yuan to its list of approved currencies for commercial banks' mandatory foreign-currency reserves, signaling the deepening financial and trade relationship between the two countries.

Central Bank Directive

According to a directive dated July 2 and published on the Bank of Angola's website on Thursday, the yuan now joins the U.S. dollar, the euro, and the South African rand as an eligible asset for these requirements.

Commercial banks in Angola are required to hold a portion of their funds as mandatory reserves with the central bank. This policy is a standard tool used to ensure financial stability and manage liquidity within the nation's banking system.

Deepening Sino-Angolan Ties

The decision reflects the significant economic ties between the African nation and China. China is Angola's key trading partner and a primary source of financing for major infrastructure projects, having provided billions of dollars in loans.

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In turn, Angola is a major supplier of crude oil to China. The inclusion of the yuan formalizes the currency's role in Angola's financial system, aligning central bank policy with the country's trade realities.

Context and Market Implications

This policy change is part of a broader trend of the yuan gaining prominence across Africa, where China has become the continent's largest trading partner. The move allows for greater currency diversification within Angola's banking system and could facilitate smoother trade settlement with China.

Despite the yuan's growing international use in specific regions, financial analysts note that the U.S. dollar remains the world's dominant currency for international trade and central bank reserves.