Kenya wants to be the first country in Africa with a yuan clearinghouse, which proponents say would reduce the need for dollar settlements, speed up transactions with China and reduce costs, according to a Reuters report in IndependentOnline.

Other African countries under consideration for the clearinghouse include Tanzania, Nigeria and South Africa. The real prize for Kenya or any African host would be the symbolism of being the continent’s business gateway with China, even if business starts modestly, the report said.

The clearinghouse prospect is a measure of China’s challenge to Africa’s traditional partners in Europe and the U.S. and reflects the increasing attractions of a continent with some of the world’s fastest growing economies.

“Even if the benefits to business have probably been slightly overblown by diplomats on both sides, I don’t think you can understate the symbolic aspect,” said Shilan Khan, Africa economist at London-based Capital Economics.

In 2012, the total volume of China-Africa trade reached $198.49 billion, a 19 percent increase over the previous year, Chinese government figures show. China accounted for 18.1 percent of Africa’s total trade volume in 2012, up from 3.8 percent in 2000.

Kenya wants the clearinghouse, “given that the financial market is deep here,” Kenyan Finance Minister Henry Rotich told Reuters in August, citing rivals such as Nigeria, which already holds some reserves in yuan.

South Africa had a financial center that dwarfs Kenya’s and has been mooted as a potential host, though officials there have not said they are pursuing such a plan.

“We are sort of competing and at the end of the day, the Chinese government is the one to decide where this clearinghouse will be,” Rotich said.

Early signals look good for Kenya, the report said.

“I think it is very important for Kenya to set up a financial hub here and to process the Chinese currency renminbi,” China’s ambassador to Kenya, Liu Guangyuan, told Reuters.

The value of potential business through such a clearinghouse is a subject of debate.

Kenya’s daily turnover of foreign exchange is $330 million to $370 million, sometimes as much as $500 million.

Designed to serve trade and payments settlements for the region, a clearinghouse could cause foreign exchange values to rise, said Kenya’s central bank governor, Njuguna Ndung’u.

A clearinghouse will allow the renminbi currency, of which yuan is the unit, to become a common settlement currency, and could in future be used for official flows such as bilateral loans or aid now denominated in dollars, experts said.

That means there would be no need to settle in dollars when trading between the Kenyan shilling or African currencies and the yuan, an extra step in any transaction that increases opportunities for arbitrage and so raises costs.

“Everyone is trying to clinch a deal to directly clear and settle yuan transaction with the People’s Bank of China,” said an unnamed official at a Chinese state think-tank that often advises Beijing on policy.

There are already yuan clearinghouses in Singapore, Taiwan and Hong Kong.

“If any region builds up the infrastructure in future, it would be a leap for the plans for offshore renminbi centres,” the official said, declining to be named due to sensitivities surrounding Chinese currency policy.

Alongside South Africa, he suggested Tanzania, a far smaller economy with longstanding ties with Beijing, as a possible site, though he said he believed South Africa might be best suited in Africa.

Oil exporter Nigeria has switched part of its reserves to yuan. It now holds about $500 million of its $47 billion reserves in the Chinese currency, an official said.

But even as Africa starts shifting more business east, the hegemony of the dollar seems assured for now. For a start, the minerals and oil China buys or extracts from Africa to fuel its growth are priced in dollars.

African dealers say careful control of the yuan is a deterrent to building more business in yuan. The currency trades at 1 percent either side of a mid-point set by China’s central bank each day.

“Unless it is liberalized, you may see a lot of traders preferring to use the U.S. dollar,” said a senior treasury dealer at a commercial bank in Nairobi who did not want to be named.

The combination of increased business dealings with China and Beijing’s policy of slowly liberalizing the renminbi is building the case for a clearinghouse in Africa.

Chris Kirubi, a Kenyan business executive and property developer, said steps to tie Africa’s economies more closely to China could only be welcomed.

“I believe China is going to be our catalyst for development and to bring in other investors from the rest of the world,” Kirubi said.