Angola Authorizes Chinese Yuan for Commercial Bank Reserve Requirements

Angola's central bank has expanded the list of approved foreign currencies for commercial bank reserves to include the Chinese yuan. The move, which reflects the deepening financial and trade relationship with Beijing, allows local banks to use the yuan to meet their mandatory foreign-currency reserve requirements.

Details of the Directive

The Bank of Angola announced the policy change in a directive dated July 2, which was published on its website on Thursday. The yuan now joins a select group of currencies accepted for this purpose, which also includes:

• The U.S. dollar
• The euro
• The South African rand

Mandatory reserves are a portion of deposits that commercial banks are required to hold with the central bank. These funds are a key tool for managing liquidity within the banking system and ensuring overall financial stability.

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Economic Context

The decision highlights China's significant role in Angola's economy. China is a key trading partner for the southern African nation and a primary financier of its large-scale infrastructure projects. Angola, a major oil producer, is a significant supplier of crude oil to China and has received billions of dollars in loans from Chinese institutions.

By authorizing the yuan as a reserve currency, Angolan authorities are formally acknowledging the currency's importance in their bilateral trade and finance activities. This move is part of a broader trend across Africa, where the yuan's usage is increasing as China solidifies its position as the continent's largest trading partner. Despite this growing influence, the U.S. dollar remains the world's dominant currency for trade and central bank reserves.