U.S.-China Relations
NextFin News - Ecobank, the pan-African lender headquartered in Togo, is in advanced talks with the Bank of China to build a direct yuan-settlement channel for Africa-China trade by the end of 2026, a move designed to cut the U.S. dollar out of a payment chain that today forces importers in Lagos, Nairobi and Lomé to convert local currency into dollars and then into yuan. The initiative lands on a widening trade imbalance: China shipped $225 billion of goods to Africa in 2025, up 25.8 percent, while Africa sold only $123 billion back, leaving the continent with a record $102 billion deficit and a structural reason to want yuan in its own banking system.
The question this deal poses is not whether African banks want an alternative to the dollar - they clearly do - but whether a payment rail can shift trade patterns when the currency it carries accounts for barely 3 percent of global payments and remains only partially convertible. Ecobank's answer is to build the plumbing first and let the flows follow.
The Deal and the Numbers Behind It
Ecobank Group chief executive Jeremy Awori said the bank is pursuing direct settlement with the Chinese yuan rather than routing through the dollar, citing demand from African small and medium-sized businesses that source goods from China.
We are looking at opportunities for us to settle with, instead of going through the dollar, we do it directly with the Chinese yuan. You need the right tools and payment mechanisms to be able to do that. We're investing in those.
The talks follow a memorandum of understanding signed on December 22, 2025, between Ecobank and Bank of China (Mauritius) Limited, which committed both sides to expand trade finance, cross-border payments and renminbi capabilities. The bank has also said it seeks to integrate with China's Cross-Border Interbank Payment System, or CIPS, Beijing's dedicated network for yuan-denominated cross-border transactions. South Africa's Standard Bank took a parallel step in November 2025, when it was authorized to offer transactions through CIPS, making the yuan the underpinning settlement currency for its clients.
The commercial logic is rooted in the size of the relationship. China has been Africa's largest trading partner for 16 consecutive years, and bilateral trade hit a record $348 billion in 2025, up 17.7 percent from the previous year, according to Chinese customs data. The growth, however, is one-sided. Chinese exports to Africa rose 25.8 percent while African exports to China grew just 5.4 percent, widening Africa's trade deficit with China to $102 billion from roughly $62 billion a year earlier. For an African importer, that deficit is not an accounting entry - it is a recurring need to obtain yuan, and today that need is met through a costly detour.
Under the current system, a trader in Accra buying machinery from Guangzhou typically converts cedis into dollars, then the dollars into yuan. Each leg carries a spread, a correspondent-banking fee, and settlement lag; the two-step process is especially punishing for small and medium enterprises whose margins cannot absorb repeated conversions. A direct local-currency-to-yuan channel removes one leg entirely and, in principle, lets African banks hold yuan balances against the liabilities they actually owe.
The market reaction to the news has been muted. Ecobank Transnational shares closed at 66.50 naira in Lagos on October 8, down from 67.00 naira the previous session, and remain well below their 52-week high of 97.40 naira. That is consistent with a story whose payoff is measured in years of fee income and customer retention rather than in the next quarter's earnings.
The Mechanism: Who Pays the Double-Conversion Tax
The first-order effect of Ecobank's plan is straightforward: bypassing the dollar removes a conversion leg, and every removed leg saves a spread. But the mechanism runs deeper than fee compression. The real cost of the dollar detour is not the visible fee - it is the working capital trapped in transit and the foreign-exchange risk carried while funds move through a correspondent chain that spans at least two time zones and three balance sheets.
For African banks, the current model creates a structural mismatch. Their customers owe yuan to Chinese suppliers, but the banks' own liquidity is raised in local currency and, when hard currency is needed, in dollars. To bridge that gap they must either hold dollar balances - expensive in a high-rate environment - or buy dollars spot as payments arrive, passing volatility straight through to the importer. A direct yuan channel lets the bank match the currency of its assets to the currency of its customers' payables. That is a balance-sheet fix, not just a pricing fix.
The beneficiaries are clearest at the SME level, where a single conversion can erase a thin margin on a container of goods. But the second-order beneficiary is the bank itself: trade-finance volume tends to follow the path of least friction, and a bank that can promise faster, cheaper settlement into China captures transactions that would otherwise migrate to competitors or to informal channels. For Ecobank, which operates across more than 30 African markets, the prize is not the margin on any single payment but the defensibility of its entire transaction-banking franchise against rivals moving down the same path.
There is also a currency-mix argument that rarely appears in the deal announcements. Africa's $102 billion deficit with China means the continent is a natural, persistent buyer of yuan. That is precisely the kind of recurring real-economy demand that gives a currency its settlement role. The dollar became dominant not because of ideology but because it sat at the center of the largest, deepest trade and financing flows; a yuan corridor into Africa builds a smaller version of the same dynamic, one container at a time.
Cyclical Wave or Structural Re-Wiring?
Is this a cyclical reaction to an expensive dollar, or a structural re-wiring of how Africa pays for its imports? The evidence points to both, operating on different time horizons, and separating them matters because it determines whether the move reverts.
The cyclical leg is real and visible. Dollar funding has been costly, dollar liquidity has been tight for import-dependent economies, and the dollar's strength has made the double-conversion tax more painful. If U.S. rates fall, dollar funding eases, and the yuan weakens, the urgency behind local-currency-to-yuan settlement would diminish. Cyclical claims require a demonstrated mean-reversion pattern, and here the pattern exists: previous episodes of dollar strength have pushed emerging-market borrowers toward currency diversification, only for the dollar to reassert itself when liquidity conditions loosened.
But the structural leg is the stronger force, and it rests on three pieces of evidence that do not mean-revert on their own. First, the trade architecture has changed: China has been Africa's top partner for 16 straight years, and the deficit is structural, driven by Africa exporting raw materials and importing manufactured goods - a pattern that does not flip with the rate cycle. Second, the institutional plumbing is being laid: Ecobank's MOU with Bank of China, Standard Bank's CIPS authorization, and the parallel build-out of the Pan-African Payment and Settlement System, or PAPSS, are fixed investments in alternative rails. PAPSS, launched in 2022 under African Union backing, is expected to save businesses about $5 billion a year on intra-African trade, and its transaction volumes reportedly jumped roughly tenfold between comparable periods in 2025 and 2026. Third, the direction of policy is one-way: Beijing has spent a decade building CIPS and promoting yuan settlement, and African governments have a shared incentive to reduce exposure to a currency whose access can be constrained by sanctions and by U.S. monetary policy.
The right read, then, is a structural shift delivered in cyclical installments. The architecture being built now will outlast any single dollar cycle, but the pace of adoption will speed up when the dollar is expensive and slow when it is cheap. That distinction matters for anyone judging the success of the initiative: a quiet quarter is not evidence of failure if the rails are still being installed.
The Yuan's Real Ceiling: Settlement Is Not Invoicing
The strongest argument against reading too much into Ecobank's move is that the yuan's global footprint remains small, and what footprint it has is concentrated in settlement rather than in genuine invoicing. In December 2025, the renminbi was the sixth most active currency for global payments by value, with a 2.73 percent share; by July 2026 it had climbed to fifth with 3.10 percent. That is progress, but the U.S. dollar still accounted for 50.10 percent of global payments by value in the July 2026 reading, with the euro at 21.88 percent, the pound at 6.71 percent, and the yen at 3.66 percent. The dollar and euro together comprise more than 70 percent of the network - a gap no single corridor deal closes quickly.
The deeper constraint is convertibility. CIPS is a messaging and settlement rail - it moves yuan efficiently - but it does not create the offshore yuan liquidity that importers ultimately need. Hong Kong alone accounts for roughly 76 percent of offshore renminbi transaction value, according to SWIFT data, which means liquidity is heavily concentrated and can be expensive or scarce outside Asia. An African bank that collects yuan from exporters may find it cheap to send yuan to China, but if its customers need to convert yuan into other currencies or if China's capital-account rules tighten, the channel's usefulness narrows.
There is also a measurement problem that flatters the yuan's rise. Chinese authorities report that about half of China's exports are settled in renminbi, but International Monetary Fund research suggests the actual invoicing share is far lower - on the order of 6.5 percent of China's exports - because much of the "settlement" is financial or intra-group rather than trade-driven. Settlement statistics can be engineered by routing existing dollar trades through yuan accounts; invoicing statistics cannot. Until African importers are pricing contracts in yuan rather than merely paying in yuan, the shift is a payments optimization, not a change in the currency of account.
Even so, the counter-thesis has a blind spot: it judges the yuan by its current global share rather than by its trajectory inside specific corridors. A currency does not need 30 percent of global payments to matter in Africa-China trade; it needs to be the cheapest, most reliable option in that corridor. CIPS processed 8.44 million transactions totaling 180.15 trillion yuan in 2025, and in the first eight months of 2026 alone it handled 6.02 million transactions worth 139.7 trillion yuan - a run-rate that points to continued expansion. The system reaches more than 4,900 banking institutions across 189 countries and regions. That is not a global alternative to SWIFT today, but it is a functioning, growing corridor network, and corridor networks are how payment systems scale.
What to Watch: Beneficiaries, the Exposed, and the Falsifying Signal
Over the short term - the next six to twelve months - the story is about implementation risk, not market share. The signals to watch are whether Ecobank and Bank of China actually switch the product on by their stated end-2026 timeline, and whether Standard Bank's CIPS volumes begin to show up in disclosed trade-finance growth. A delay would not kill the thesis, but it would confirm that the binding constraint is technical and regulatory integration, not demand.
Over the medium term, the winners are the pan-African banks that control the customer relationships: Ecobank, Standard Bank, and any regional peers that build comparable yuan corridors. They capture the fee income, the deposits, and the stickier transaction-banking relationships. The exposed parties are the correspondent banks and the dollar-clearing intermediaries that currently earn spreads on the Africa-China leg; their volumes would erode gradually rather than collapse, since the dollar will remain the default for trade with the rest of the world.
Over the long term, the question is whether the yuan becomes a currency of account for Africa-China trade rather than just a currency of settlement. That requires two things: deeper offshore yuan liquidity outside Hong Kong, and Chinese policy tolerance for two-way convertibility that lets African exporters hold and deploy yuan without friction. If both arrive, the current deficit dynamic could slowly reverse in a different form - African commodity exporters pricing in yuan, African importers holding yuan working capital, and the dollar's role in the corridor shrinking from a necessity to an option.
Three scenarios frame the path. In the base case, Ecobank launches the channel on time, adoption is gradual among SMEs, and the yuan's share of Africa-China settlement rises steadily while the dollar remains dominant elsewhere. In the upside case, China deepens offshore liquidity and eases convertibility, turning the corridor into a genuine two-way market and pulling other African banks into a rapid build-out. In the downside case, technical integration stalls, yuan liquidity outside Asia stays thin, and the product remains a niche option for a handful of large importers.
The falsifying signal is specific: if the renminbi's share of global payments stalls below 3 percent through 2027 while CIPS annual transaction growth stays in the low single digits, the structural re-wiring thesis is wrong and this is merely a cyclical cost-saving exercise. A second warning sign would be if Africa's trade deficit with China narrows sharply without a corresponding rise in yuan invoicing - that would suggest the corridor is being bypassed rather than adopted.
The central judgment: Ecobank's yuan channel is a small bet on a large structural shift, and its success depends less on the payment rail than on whether China is willing to export the liquidity and convertibility that make a settlement currency usable. The rails are being laid; the liquidity is the harder part, and it is the part Beijing controls.
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