Demand is increasing for African business to be transacted in Chinese yuan, according to a report in ChinaDaily.

South Africa’s Standard Bank has started providing renminbi services in association with the Singapore branch of Industrial and Commercial Bank of China, its largest shareholder and strategic partner, the report said.

“Although the use of yuan is still limited, we believe there is potential with the growing trade volume and ties between China and Africa,” said John Beynon, head of foreign exchange sales at Standard Bank in South Africa.

Demand for yuan has picked up in Angola and Namibia for trade settlement purposes, as well as in Zimbabwe and Zambia for investment purposes, the report said.

There has also been a steady increase in inquiries across the continent for personal remittances in yuan by Chinese employees working in Africa who need to send a portion of their salaries home, Beynon said.

The focus of creating offshore yuan trading centers in Africa will be in countries that have a trade surplus with China, such as South Africa, said Liu Yagan, chief representative of ICBC Africa.

Liu admits the establishment of offshore yuan markets in Africa still faces many challenges.

“There is a wide range of internal imbalances and over-reliance on the external market in most African countries. This has led to very unstable exchange rates, which has hampered the development of currency swap agreements,” he said.

The Chinese government should enlarge the quota on yuan-denominated overseas direct investment in order to channel more yuan to Africa through direct investment, Liu added. “China should also create more channels between the offshore yuan markets and the domestic financial markets to boost incentives for investors to use the Chinese currency.”