Research On The Feasibility Of China To Help Zimbabwe's Currency Reform

In July 8th,2015,Mnangagwa,the vice president of Zimbabwe,announced that Zimbabwe will use the Chinese currency RMB as its legal currency.He said that Zimbabwe will also give investment advices to China in the key economic areas and special economic zones,including energy,road and rail network development,tourism,manufacturing,information and communication technology.In order to analyze this problem,firstly,this essay analyzes the advantages and disadvantages if China really helps Zimbabwe's currency reform.For the good part,this will expand the use of the RMB,and this will enhance the political and economic relations between China and African countries.At the same time,this will bring a considerable seignior age revenue.For the bad part,if RMB has become the legal currency of Zimbabwe,it will mean that the political and economic risks in Zimbabwe will transfer to China via the use of RMB.In other words,China and Zimbabwe will share some political and economic risks and China's macro-economic policies will also encounter dilution.But overall,that China helps Zimbabwe's currency reform will bring more benefits than disadvantages.Then this essay reviews the historical causes of Zimbabwe's current economic difficulties,and thereby finds out the major economic factors influencing Zimbabwe's economy:inflation rate,GDP,and the percentage that government revenue GDP accounted.It is concluded that if Zimbabwe wants to control its inflation,it must coordinate the relationship between GDP and the government's total income.By influencing the inflation rate.GDP and total government expenditure,we suggest that China can invest in the construction of Zimbabwe's infrastructure facilities,and finally gradually improve the status of RMB in the whole world.Finally,this paper analyzes the ways of managing risks during the whole process,and summarizes the significance of China's actions,and looks forward to the future research directions.