While many worry about China’s economy, Zimbabwe adopts the yuan as its international currency.
By Samuel Ramani
China’s currency has certainly been in the news so far this year, but one milestone of sorts at the end of 2015 attracted relatively little attention. On December 22, Zimbabwe became the first foreign country to adopt the Chinese yuan as its primary international currency. Zimbabwe’s Finance Ministry announced this decision after the Chinese government agreed to cancel $40 million in Zimbabwean debt. While critics of Beijing have described this move as neocolonial, Zimbabwean officials have insisted that the adoption of the yuan did not come from Chinese pressure but was instead the natural progression of Robert Mugabe’s “Look East” foreign policy strategy.
Zimbabwe’s isolation from Western markets due to its extreme economic volatility and Robert Mugabe’s authoritarian system has caused China to become its primary international ally in recent years. Chinese president Xi Jinping’s December 1 state visit to Harare reaffirmed China’s commitment to investing in Zimbabwe by announcing multi-billion dollar energy and infrastructure deals.
China’s close ties with Zimbabwe can be explained by historical legacies, normative convergences, and practical economic benefits. Zimbabwe was arguably China’s strongest African ally in the last years of the Cold War, an alliance that has consistently strengthened since 1991. China is also Mugabe’s leading international supporter against Western condemnations of his authoritarian policies. Beijing has also spearheaded economic recovery efforts in Zimbabwe to strengthen its leverage over the country and set a precedent for other alliance-building efforts in Sub-Saharan Africa.
Historical Allies and Normative Partners
China’s partnership with Mugabe began with its support for the Zimbabwe African People’s Union (ZAPU) during the 1979 Rhodesian Bush War. Mugabe’s political future was in jeopardy after the Soviet Union backed Joseph Nkomo’s rival faction in that conflict, so Chinese support played an integral role in ZAPU’s eventual consolidation of power. China greatly expanded its economic investments in Zimbabwe during the 1980s, building a national sports stadium, the country’s largest shopping mall, hospitals and power stations. When Mugabe began to repress Nkomo’s supporters in Matabeland in 1984, China was his largest arms supplier. From 1980-1999, Zimbabwe imported 35 percent of its arms from China.
China’s relationship with Zimbabwe deepened during the early 2000s, as the European Union and United States vociferously condemned political violence in Zimbabwe and Mugabe’s flagrant human rights violations. The Council of Europe imposed targeted sanctions on Zimbabwe in February 2002 after concluding that upcoming elections would not be free and fair. In response to increased economic isolation from Western powers, Mugabe announced his Look East policy in 2003. This policy pivoted Zimbabwe economically towards the Asia-Pacific region, with an emphasis on closer trade relations with China.
China’s opposition to Western condemnations of election fraud in Zimbabwe has strengthened the normative partnership between the two countries. During the 2008 UN resolution calling for an arms embargo on Zimbabwe and travel restrictions on Mugabe and 13 of his closest allies, China opposed humanitarian sanctions against Zimbabwe on the grounds that Western powers were meddling inappropriately into the country’s internal affairs. China’s stance received support from Russia, which is also an important arms supplier to Zimbabwe, and South Africa, whose president Thabo Mbeki supported the Chinese stance on the grounds that Zimbabwe did not pose a security threat to its neighbors in Southern Africa.
Zimbabwe’s opposition leaders have predictably derided China’s cordial relations with the Mugabe regime. During the 2013 presidential election campaign, Mugabe’s primary challenger, Movement for Democratic Change Zimbabwe (MDCZ) leader Morgan Tsvangirai pledged to crack down on Chinese businesses violating Zimbabwean law and reject Chinese mining investments that do not stimulate economic development. Anti-Chinese sentiments amongst Zimbabwe’s opposition leaders caused China to escalate its support for the aging dictator, with Xi Jinping describing Mugabe as an “all-weather friend” during his December 1 trip to Harare.
China’s African Strategy
China’s extensive investments in Zimbabwe’s crisis-ridden economy and rhetorical support for Mugabe’s isolated regime are crucial to its broader strategy for expanded influence in Africa. If China can engineer a marked improvement in political and economic conditions in Zimbabwe, it will be able profit economically from a country that Western powers have very limited leverage over and set a precedent for other Sub-Saharan African countries to pivot towards China.
China has therefore taken a leading role in modernizing Zimbabwe’s dominant agricultural and mining sectors in a manner amenable to its broader interests. In 2003, Robert Mugabe agreed to a landmark Chinese agricultural investment deal to bolster Zimbabwe’s corn production, after his radical land redistribution policies left an estimated 7 million Zimbabweans at risk of famine. The long-term goal of the project was to restore Zimbabwe to agricultural self-sufficiency and to its former status as the “breadbasket of Africa.” Even though this effort failed, China became the dominant importer of a vital Zimbabwean cash crop, tobacco. By 2015, China was the destination of 54% of Zimbabwe’s tobacco exports.
China’s attempt to rehabilitate the Zimbabwean mining sector has followed a similar trajectory. China’s mining interests in Zimbabwe are wide-ranging with its first major foray in 2003 being a $300 million investment in Zimbabwe’s iron, steel, chrome and platinum resources. The commercialization of diamonds as a Zimbabwean export product rapidly increased Chinese investments in the mining sector and forced Mugabe to make major economic concessions to China.
As public opposition to illicit revenues accrued from diamond exports soared, Mugabe implemented a nationalization law in 2008, which would give local owners majority control over companies possessing assets of more than $500,000. However, Mugabe’s dependence on Chinese investments had risen to the point that he had to exempt China’s deals from the nationalization law. This exception consolidated China’s hegemonic position over the mining sector.
China also appointed pro-Beijing Zimbabwean military officials to senior leadership positions in its mining companies. As military loyalty is vital for Mugabe’s continued stranglehold on power in Zimbabwe, China’s leverage over the regime has increased substantially with these appointments. China’s vital role in propping up the Mugabe regime prevents him from enacting anti-Chinese policies to appease public discontent over corruption, environmental degradation, and human rights abuses perpetrated against Zimbabweans working for Chinese companies.
Zimbabwe’s extensive integration with the Chinese economy is potentially transferrable to other African countries. China has been careful to frame its investments in Zimbabwe as creating a balanced, cooperative relationship to distance itself from accusations of neo-imperialism. China’s recently expanded trade links with authoritarian African regimes that have strained relations with the West, like Uganda, provide an opportunity for Beijing to replicate its Zimbabwe strategy. China’s present economic concerns notwithstanding, other African countries could emulate Zimbabwe’s adoption of the yuan as a primary currency. Since 2014, Ghana and Nigeria have begun to shift their currency reserves away from the U.S. dollar and towards the yuan.
China’s heightened ties with Zimbabwe and Zimbabwe’s adoption of the yuan is the culmination of more than three decades of consistent cooperation between the two countries. Should these linkages inspire an improbable recovery of the Zimbabwean economy, they could be a harbinger for profoundly expanded Chinese influence in Sub-Saharan Africa.
Samuel Ramani is an MPhil student in Russian and East European Studies at St. Antony’s College, University of Oxford. He is also a journalist, whose work has also been featured in the Huffington Post, Washington Post, Kyiv Post and the Carnegie Endowment for International Peace.