Zambia Accepts Chinese Yuan for Mining Taxes as Currency Strategy Shifts

Zambia has begun allowing some Chinese-owned mining companies to pay royalties and taxes in Chinese yuan rather than United States (US) dollars, marking a notable shift in how the country manages foreign currency flows linked to its mining sector.

The rationale is largely practical. Zambia is Africa’s second-largest copper producer, and copper has historically generated around 70% of the country’s export earnings. China is the dominant buyer of Zambian copper, and many Chinese mining firms already receive export payments in yuan. Allowing taxes to be paid in the same currency reduces conversion costs and pressure on dollar liquidity.

Dollar shortages have been a persistent problem for Zambia. Most external obligations have traditionally been serviced in dollars, even when debts are owed to non-US lenders. This structure has strained Zambia’s reserves, particularly during periods of high debt servicing.

In 2018, as external debt rose, the government required mining companies to sell foreign currency earnings to the central bank to pay royalties. That requirement was expanded in 2020 to cover all mining tax payments, helping the state accumulate dollars for debt repayments.

Accepting yuan now allows Zambia to build yuan reserves alongside dollars. This is especially relevant given that China accounts for a large share of Zambia’s external debt, estimated at over 40%. Some Chinese loans already allow repayment in yuan.

The decision also fits into a wider global trend. China has spent more than a decade promoting the yuan’s international use. Several African countries, including Kenya and Ethiopia, have also explored or implemented limited yuan-based financing arrangements.

China has supported this shift by expanding the Cross-Border Interbank Payment System (CIPS), which provides an alternative to the Western-dominated equivalent, the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, network. Transaction volumes on CIPS have risen sharply in recent years.

Standard Bank’s approval to use CIPS gives African firms new options for settling trade with China, but widespread yuan use remains limited.

What is changing most visibly is debt currency. If more borrowers can service obligations in currencies other than the dollar, one pillar of dollar demand weakens. Zambia’s shift is less about ideology than survival. When your main customer trades in yuan, your largest creditor accepts yuan, and dollars are scarce, currency flexibility becomes an economic necessity rather than a political choice.