For many small and medium enterprises (SMEs) in Malawi, the journey to source goods from China is a long and expensive detour through the American financial system.
A trader in Lilongwe will convert the kwacha into dollars, wire or carry the money to China, then convert again into yuan to pay for goods. Multiplied across thousands of traders, this circuitous route drains precious foreign-exchange reserves, pushes up the demand for dollars and piles unnecessary transaction costs onto an economy that can scarcely afford them.
It is time for Malawi to take the lead among its peers and begin settling its trade with China directly in yuan.
The case for doing so is as practical as it is strategic. Malawi’s trade and investment relationship with China has grown rapidly in recent years. In 2023, Malawian exports to China were valued at around $54 million (about K94 billion) while Chinese exports to Malawi reached roughly $252 million (about K441 billion) the following year.
At the same time, Malawi has secured record Chinese investments in its mining and infrastructure sectors, most notably a $7 billion agreement with China’s Hunan Sunwalk Technology Group to develop titanium extraction and processing facilities in Salima District. That deal is part of a broader package of around $12 billion in mining and infrastructure deals with Chinese investors, including a $5 billion commitment to establish a Special Economic Zone in Chipoka on Lake Malawi’s shore.
These investments matter not merely for sums, but because they signal that large pools of Chinese capital and hence yuan-flows will soon be active in Malawi. If the government positions itself properly, there will likely be a huge influx of yuan ready to be utilised by Chinese firms and their local partners, a fact that makes the economic case for yuan settlement even stronger.
Across Africa, similar realisations are taking root. In Nairobi’s Eastleigh market, a sprawling commercial hub dominated by imports from China, local traders have created informal yuan-payment networks. Logistics firms act as currency conduits, converting Kenyan shillings directly into yuan and wiring payments to sellers in Guangzhou or Yiwu.
Kenyan traders no longer have to handle dollars at all; the arrangement is faster, cheaper, and less exposed to global exchange volatility. Kenya’s central bank has gone further: it is now considering including the Chinese renminbi in its foreign-exchange reserves, a move its governor described as “inevitable” given the strength of Sino-Kenyan trade ties.
Last month, Kenya finalised converting $3.5 billion in US dollar loans from China Exim Bank to Yuan, slashing interest rates from six to seven percent to two to three percent and saving $215 million a year year on SGR railway debt.
Now, Ethiopia is in talks to follow suit, swapping about $5.38 billion of its China loans to yuan amid debt reprofiling. Nigeria has equally done currency swap with China.
For Malawi, the logic is even stronger. The country’s chronic shortage of foreign exchange, combined with its dependency on dollar-denominated imports, has long been a source of macro-economic instability.
Every kwacha-to-dollar-to-yuan conversion feeds the pressure. If local traders could instead access a kwacha-to-yuan settlement channel through domestic banks, the demand for dollars would ease, reducing pressure on reserves and helping to stabilise the kwacha. And thanks to the scale of Chinese mining commitments, there is reason to believe the requisite yuan-flows will materialise in the near term.
Kenya’s experience offers a useful model. Several Kenyan banks have opened yuan-denominated accounts, allowing importers and exporters to transact directly in Chinese currency.
Similar facilities could be established in Lilongwe, Blantyre and Mzuzu through partnerships between Malawian banks and Chinese financial institutions. If the Reserve Bank of Malawi were to negotiate a bilateral yuan-settlement arrangement with Chinese banks, traders could bypass the dollar entirely.
China has just includedStandard Bank and African Import and Export Bank (Afreximbank) to a network of banks directly connected to China’s Cross-border Interbank Payment System payment system, which removes the need to use the dollar, reduces price swings and speeds up payment times from days to almost instant.
The integration, secured after obtaining a licence in June 2025, builds on Standard Bank’s long-standing partnership with the Industrial and Commercial Bank of China, which holds a 20 percent stake in the bank since 2007.
In an interview, Standard Bank Malawi plc chief executive Phillip Madinga said the Malawi Stock Exchange-listed bank, which is a subsidiary of the Standard Bank Group, will be part of the system, which he described it as a breakthrough in many ways.
He said this will make payment faster and cheaper without western banks intermediary, zero usage of SWIFT, making settlements of trades with Chinese partners in Renminbi (RMB) in seconds, bypassing the dollar and correspondent banks.
Said Madinga: “This makes predictable cash movement and flow for currently sanctioned businesses and people by Western governments.”
He said the milestone is also beneficial to government and it ensures financial sovereignty, reduces exposure to dollar volatility and liquidity shortages and accelerates and supports trade goals.
The benefits are clear. By eliminating one stage of currency conversion, traders save on fees and reduce exposure to dollar fluctuations.
The central bank conserves scarce dollars, giving breathing space in a market that frequently experiences foreign-exchange shortages. Easier settlement could also boost trade volumes with China, particularly in manufacturing inputs and agro-exports.
This year, Malawi secured more than $120 million in export deals at the China-Africa Economic and Trade Expo, an opportunity that would grow even larger if transaction friction were reduced.
There is, moreover, a strategic dimension. By positioning itself as a yuan-friendly economy, Malawi could send a strong signal to Chinese investors and lenders that it is a reliable partner. That reputation could attract more investment and more favourable financing terms for infrastructure and industrial projects, a possibility made more tangible by the scale of mining commitments already on the table.
Of course, there would be challenges. The yuan is not yet as freely tradable as the dollar and liquidity could become an issue if demand outpaces supply. Malawi’s banking sector would need to build technical capacity to handle yuan-denominated accounts, hedging and settlement systems.
The risk of deepening dependence on Chinese trade is real, particularly since Malawi’s exports to China still lag imports, an imbalance that could accumulate yuan-denominated liabilities unless managed carefully. Local banks and regulators must be trained, systems upgraded and safeguards put in place.
But none of these are insurmountable. The Reserve Bank of Malawi could begin by holding a modest yuan reserve position and gradually scale it. Local commercial banks could enter partnerships with Chinese counterparts such as the Bank of China or Industrial and Commercial Bank of China to gain technical expertise.
Ministry of Trade could promote Malawian exports of tea, coffee, macadamia and sugar into China, thereby improving the trade-balance equation and ensuring that yuan inflows are matched by value-added outflows. Transparency, governance and diversification must be central: the goal is not to replace dependency on the dollar with dependency on the yuan, but to widen Malawi’s options.
In today’s global landscape the dollar is becoming less of a safe harbour and more of a choke-point. Its strength, driven by high US interest rates, makes imports more expensive for developing countries and fuels inflation at home.
For Malawi, the shift would not be revolutionary, it would merely formalise what is already happening in practice. Thousands of Malawian traders in markets ranging from Lilongwe’s Area 2 to Blantyre’s Limbe already rely on Chinese suppliers. They are, in essence, conducting yuan-denominated trade through informal intermediaries.
Bringing that system into the formal banking sector would make it safer, more efficient and more transparent.
Malawi has often been a cautious actor on the regional stage, preferring to wait and watch before embracing new financial trends. Yet in this case hesitation may be costlier than courage.
By establishing a direct kwacha-to-yuan settlement corridor, Malawi could reduce dependence on the dollar and ease pressure on its reserves.
