The rapid growth of China's international trade has had a dramatic impact on its economy. China has grown in a short time to become the second largest economy in the world. In order to match its economy with the international use of its currency - the renminbi (RMB) - China has begun the process of RMB internationalization from the pilot cross-border RMB settlement scheme and capital account opening several years ago to facilitating and encouraging the use of the RMB outside the Chinese mainland.

The RMB is being more widely used and gaining more international characteristics. According to SWIFT data, by the end of September, it ranked fourth as the most used payment currency, the second most widely used trade finance currency, and the sixth largest foreign exchange trading currency.

Besides the traditional RMB markets in Hong Kong and Taiwan of China, Singapore, London and other major financial centers, the RMB has also become a presence on the African continent with the enormous increase in Sino-African trade volume.

China has been Africa's largest trade partner for six consecutive years, with bilateral trade amounting to $221.88 billion in 2014. As more RMB payments and settlements are made in trade between the two, more of the Chinese currency will circulate in African economies, not only as the currency of payment but also as the reserve currency and the currency of investment and finance.

Semi-annual data from SWIFT this year show payments by RMB increased by 33 percent compared with last year, and 191 percent compared with the year before. Also, one third of direct payments between South Africa and the Chinese mainland and Hong Kong were settled in RMB; the ratio had been just one 10th last year.

In order to clear the RMB more efficiently and satisfy the increasing demand for RMB clearing services, Bank of China's (BOC) Johannesburg and Zambia branches were designated as RMB clearing banks by the People's Bank of China (PBOC), China's central bank, this year. The designation shows the industry's recognition of the rapid progress of RMB transactions in Africa.

Up to now, BOC has opened RMB clearing accounts for 64 financial institutions, including two central banks, in 28 African countries. It provides various RMB finance services, especially in corporate finance, trade finance and financial markets services, such as syndicated loans, bilateral loans, project financing and letter of credit.

The RMB is becoming one of the major reserve currencies in Africa. With market-oriented reform deepening, both China's economy and the RMB exchange rate show strong signs of stability. As a result, more and more African countries - such as South Africa, Nigeria, Angola, Tanzania, Kenya and Ghana - have the RMB as their foreign exchange reserve currency. In April, the South African Reserve Bank (SARB) and PBC signed a currency swap agreement with a scale of 30 billion yuan ($4.7 billion)/54 billion rand.

Less exchange risk

The RMB is also becoming an important investing and financing currency for Africa. More African countries have a real demand for diversifying their foreign exchange investments. SARB, facilitated by BOC, has entered China's interbank bond market and invested in yuan bonds. On the other hand, as China-Africa cooperation in investment and financing becomes broader, the RMB will definitely make a considerable contribution to the process.

With more and more Chinese enterprises going out and making investments in Africa, settlements by RMB will help them mitigate the exchange risk, control transaction costs and manage their balance sheets. Compared with other Asian and European international financial centers, the scales of RMB markets in Africa may not seem big enough. However, it is anticipated that the RMB will make huge progress on the continent in the foreseeable future.

Potential commodity pricing in RMB is one strong incentive. Africa has outstanding advantages in resources, which are highly complementary with the Chinese economy. Traditionally, commodities like oil are priced in the U.S. dollar. But as more and more payments and settlements between China and Africa are made by RMB, pricing in RMB will be the best choice for both China and African countries.

We also firmly believe that with China's Belt and Road Initiative extending its scope to Africa, and more trade and cooperation happening between China and Africa, both China and Africa can't develop without each other, especially without the RMB.

The author is senior executive vice president of Bank of China Johannesburg Branch