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The global financial system is dominated by the United States through their currency, the US$. Most international business transactions are made through the US$ and have to be processed via the US. But a game-changer is in the offing, unsurprisingly coming from China. Beijing has introduced the China International Payment System that enables international business to be conducted in the Chinese currency, the Yuan.

In recent years, China has, in many ways, challenged the US supremacy in its various forms. China now has the world’s biggest middle class, 300 million of its 1, 35 billion people. The size of China’s middle class is almost equal to the US’s 321 million national population. A middle class is important for any economy because of its high spending power and being the source of nations’ creative and entrepreneurial potential.

Since the introduction of economic reforms in 1978, China has become one of the world’s fastest-growing major economies. China is the world’s second-largest economy by nominal total gross domestic product after the US and largest by purchasing power parity. In fact, in October last year some economists proclaimed that it had actually overtaken the US as the world’s biggest economy, as figures showed that the Chinese economy was worth £11 trillion and the US’s at £10.8 trillion.

China is the world’s largest exporter and second-largest importer of goods.

So with all the statistics in its favour, it was only a matter of time before the Asian giant succeeded the US as the dominant force in the global financial system, a status America has enjoyed since 1872 after succeeding Britain.

The CIPS intends to internationalise the Chinese currency. It accepts payments in cross-border trade, direct investments, financing and personal remittances.

Those who want a more democratic economic system to prevail in the world must be pleased with what China has done.

Zimbabwe has had a bitter experience of the injustices that are sometimes visited upon governments and people who anger the US. Large sums of money that were being transacted by some local companies that are under American sanctions or connected to persons listed under the embargo, were confiscated since 2001. The Industrial Development Corporation lost over $20 million to the US while the Minerals Marketing Corporation of Zimbabwe had over $30 million seized.

Olivine-a subsidiary of IDC lost a $2million loan it had secured from the PTA Bank to capitalise while a Zimbabwean resident in Botswana had his $1,000 frozen.

In the new dispensation such challenges would be minimised.

Confederation of Zimbabwe Industries president, Busisa Moyo said:

“It’s a positive alternative because business options are always better than no options. The world is better off with alternatives and Zimbabwe certainly is better off. We all know that because of sanctions certain companies’ payments were held for cynical reasons. So it is better to have options of payment. The problem at the moment is that when you wire in US currency they go through the United States’ settlement system. BRICS countries are the ones that are going to benefit more at the moment because ours is still in US currency so it will still go through Washington.”

Zimbabwe is using a basket of foreign currencies, led by the US$. The Yuan is one of them. We note that some in the opposition and economists who think like them have attempted to deride the government for formally including the Yuan as one of the currencies that can be used on the local market. They sought to create the impression that the government was subjecting the country to Chinese domination, but the often pro-West detractors curiously did not say the same with regards to the more dominant US$. The negativity cannot stand now as the Yuan is now an international currency at par with the US$.

There is no doubt the system will benefit China. It improves efficiency and will increase the use of the Yuan globally by cutting costs and processing time. It also further boosts China’s presence on the world stage. Nineteen banks have been permitted to use CIPS. Eight of them are Chinese subsidiaries of foreign banks, including Citi, Deutsche Bank, HSBC and ANZ.

Beijing is pushing hard for the inclusion of the Yuan in the International Monetary Fund (IMF) currency system though the multilateral financial institution has said the currency still does not yet meet the criteria of a “freely usable currency.”

With the latest development, the Yuan stands a good chance of being included in the IMF basket of currencies. But for Zimbabwe, the CIPS is important in democratising business, enhancing freer movement of money and giving the economy an easier and safer platform for businesses and prominent politicians to transact on. They cannot fully trust the US system.