The launch of an RMB clearing bank in Mauritius marks a bold step in financial diversification. By balancing ties with China and India, Port Louis signals a shift toward multi-currency systems – also challenging Europe to adapt its approach as African states seek flexibility beyond dollar dominance.
Small and medium-sized enterprises which depend on imports from China could benefit from the new RMB clearing bank and the thus faster payment processing as well as better conditions with Chinese suppliers, Port Louis, Mauritius, September 15, 2024.
© picture alliance / Eibner-Pressefoto | Ingo Schulz / Eibner-Pressefoto
On 12 June 2025, Bank of Mauritius Governor Dr Rama Krishna Sithanen and Bank of China Chairman Ge Haijiao officially designated Bank of China (Mauritius) Limited as the island’s offshore renminbi (RMB) clearing bank – consolidating the position of Port Louis as a financial bridge between Africa and Asia. Banks can now settle their transactions with China directly in RMB, reducing currency risks. Yet this is more than a commercial milestone: it signals an ambition to reform the global financial system, echoing similar momentum across the continent. The move underscores Mauritius’s commitment to a foreign policy of multi-alignment – pursuing flexible, needs-based partnerships with a range of international actors, while avoiding rigid alliances. Although this is a rational strategy amid growing hegemonic uncertainty, such flexibility can also give way to vulnerability.
China–Africa trade reached USD 282 billion in 2023, of which China’s exports to Africa represented USD 172.8 billion and its imports from Africa USD 109.3 billion. Chinese direct investments exceeded USD 40 billion in the same year. While the RMB accounts for only 2% of global reserves, its cross-border usage is growing, especially in Asia and Africa. China’s push since 2008 to internationalize the RMB reflects its broader goal of reshaping the financial system.
RMB clearing banks simplify transactions and boost liquidity, laying the groundwork for currency internationalization. IMF data show that strong trade ties, geographic proximity and political alignment between China and its partners play an important role in explaining RMB usage. In parallel, in a multipolar world, as Barry Eichengreen argued back in 2012, the dominance of the dollar is likely to diminish, potentially leading to a more diversified global monetary system with several currencies holding reserve currency status. Although the dollar remains strong in reserves, trade, and transactions, using RMB for cross-border payments where the issuing country is involved is also seen as a first step towards currency internationalization.
China’s choice of Mauritius as a partner – the first African country to conclude a free trade agreement and now to host an RMB clearinghouse – reflects a two-fold strategic calculation. On one level, Mauritius offers a relatively small and manageable market, making it an ideal testing ground before China expands such initiatives across the continent. More importantly, however, the island is notable for its robust financial infrastructure and regulatory advantages. With a network of double taxation avoidance agreements covering 16 African countries and regions, coupled with strong political stability and guaranteed free capital mobility, Mauritius presents itself as a secure and attractive gateway for Chinese investment in Africa.
Mauritius imported nearly USD 1 billion from China in 2023, but exported just USD 31.7 million – highlighting a persistent imbalance. The 2019 Mauritius–China Free Trade Agreement (MCFTA) – the first with an African country – was meant to open opportunities, but Mauritius’s small-scale exporters struggle to compete in China. Efficient, low-cost clearing systems like the RMB centre help manage this asymmetry by improving payment processing and reducing FX risk.
By facilitating smoother transactions and reducing foreign exchange exposure, the new clearing infrastructure enables Mauritius to handle the high volume of Chinese imports more effectively while supporting outbound trade and investment flows. The long-term ambition is clear: to position Mauritius as a key financial node in the China–Africa economic corridor.
But the island’s strategy is not solely driven by trade logistics. There is also a broader political and strategic calculus at work. Mauritius envisions itself as a top offshore RMB clearing hub and is aligning this ambition with AfCFTA integration goals. As Governor Sithanen noted, the RMB centre supports Mauritius’s role as a bridge for China–Africa investment flows. It also positions the island to attract RMB-linked financial instruments, deepen capital markets, and enhance its status as a financial centre. With more African economies seeking alternative funding channels and capital market solutions, Mauritius is actively presenting itself as a preferred platform for listing and structuring RMB-denominated financial instruments.
Far from aligning itself exclusively with one major power, Mauritius is actively pursuing a policy of financial multi-alignment, aiming to avoid overexposure to any single partner. Mauritian officials have gone to great lengths to present the RMB clearing initiative not as a challenge to India’s own currency ambitions, but as a complementary move within a broader vision of regional financial integration.
A precedent for this balanced approach can be found in 2021, when the MCFTA came into force – just one month before Mauritius signed the Comprehensive Economic Cooperation and Partnership Agreement with India. More recently, in 2024, Mauritius adopted India’s Unified Payments Interface and enabled the use of RuPay cards, India’s own card payment network, on the island, significantly easing transactions for Indian tourists and business partners, and reinforcing digital economic linkages between the two countries.
This balancing act continued into 2025, when Mauritius signed an INR–MUR Local Currency Settlement (LCS) agreement with the Reserve Bank of India during Prime Minister Narendra Modi’s visit to the island. This framework now allows for bilateral trade to be settled in Indian rupees, mirroring the RMB clearing centre’s objective of providing an alternative to US dollar dominance. The accompanying Memorandum of Understanding also lays the groundwork for an INR Clearing Centre in Mauritius, which is envisioned to serve as a regional hub for the Common Market for Eastern and Southern Africa’s (COMESA) Regional Payment and Settlement System, for which the Bank of Mauritius acts as the settlement bank.
Unsurprisingly, when inaugurating the RMB clearing facility, Bank of Mauritius Governor Dr Rama Krishna Sithanen highlighted the complementary agreements signed with the Reserve Bank of India – underscoring Mauritius’s intent to thrive in a multi-currency environment.
Now, with both INR and RMB clearing systems operating in parallel, Mauritius is effectively hedging between two powerhouses. This dual-track strategy reflects not only a pragmatic response to an increasingly multipolar world but also a calculated effort to manage the competitive dynamics between China and India – without becoming a proxy battleground for either. Finally, a broader message was sent to the global financial system itself. As the Governor emphasized: “this move is not about decoupling from traditional financial partners. Rather, it is about adding new and diversified avenues and providing businesses with greater flexibility to choose instruments and currencies that best suit their needs.”
Mauritius’s approach reflects a broader trend among small and mid-sized states seeking strategic diversification in an increasingly fragmented global order. This multi-alignment strategy offers clear advantages: it reduces reliance on any single power, broadens access to competing sources of finance and technology, and reinforces national autonomy. Yet, as economists such as Gita Gopinath and Barry Eichengreen have cautioned, diversification also carries risks – most notably, the potential for systemic fragmentation. Gopinath warns that growing financial fragmentation could raise transaction costs and undermine predictability, with smaller economies particularly vulnerable to such volatility. For countries like Mauritius, the central challenge lies in balancing strategic flexibility with institutional capacity – ensuring that diversification strengthens resilience rather than slipping into overextension or regulatory incoherence.
The case of Mauritius illustrates both the potential and the fragility of an African state’s multi-alignment strategy. While the country welcomes China’s economic engagement, it remains deeply mindful of the need to avoid alienating India – its closest political and security partner. Despite an effective multi-alignment strategy, Mauritius faces structural limitations that may constrain its long-term manoeuvrability. Its limited regulatory and bureaucratic capacity can create bottlenecks in managing diversified strategic partnerships, particularly in complex domains like cybersecurity, dual-use tech, and financial governance. As a result, Mauritius remains exposed to external economic and normative pressures – as seen when the EU and OECD scrutinized its offshore financial regime, or when India revised the Double Taxation Avoidance Agreement, curtailing tax benefits for Foreign Portfolio Investors routed through the island.
Mauritian policymakers view a multipolar world and a multi-currency system as offering more room to manoeuvre, believing that diversification reduces vulnerability. But this strategy of careful hedging is not without risks. The often-invoked phrase “navigating the system” hints at an uncomfortable truth: the success of multi-alignment ultimately depends on the tolerance and shifting priorities of larger powers. In a volatile geopolitical environment, small states like Mauritius may find that flexibility can quickly turn into exposure – especially when great power competition intensifies or demands clearer alignment.
What Mauritius – and many other emerging African economies – increasingly seek from their international partners is a pragmatic, non-ideological form of engagement that moves beyond zero-sum thinking and systemic rivalry. This trend is part of a broader shift, driven in part by fundamental changes in the international system, in response to which Africa seeks to move away from an outdated model of dependency on external finance and raw commodity exports, and toward a strategy that leverages domestic resources while mobilizing international private capital. While Europe is unlikely to fully abandon established practices of engagement, adopting a more nuanced approach to norm promotion and a more pragmatic foreign policy – paired with a differentiated, business-minded strategy focused on a clearly defined set of strategic partners – could actually enhance trust and credibility. Such an approach would not only support Europe’s long-stated goal of partnerships “at eye level”, but also ensure that these relationships move from rhetorical ambition to tangible cooperation.
Dr Benedikt Erforth is project director of "Megatrends Afrika" at the German Institute of Development and Sustainability (IDOS).
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