In return for China's cancellation of its $40 million debt, Zimbabwe has announced that it is planning to adopt China's legal currency, the yuan, as its legal tender. But it will only be used in trade between the two countries.

Chinese President Xi Jinping paid a visit to Zimbabwe this month, pledging billions of dollars in economic package for its development.

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In a statement released on Monday, Zimbabwe's Finance Minister Patrick Chinamasa announced the plan to use of yuan as the country's currency. He said that it "will be a function of trade between China and Zimbabwe and acceptability with customers in Zimbabwe."

Zimbabwe has been relying on China's huge investment in its country over the years after the West refused to extend financial aid to the country because of its record of human rights violations.

Zimbabwe is deep in debt and has been struggling to overcome a deep recession for ten years, forcing the government to disuse its own currency in 2009.

"They [China] said they are cancelling our debts that are maturing this year and we are in the process of finalizing  the debt instruments and calculating the debts," Chinamasa said.

Zimbabwe has received around $1 billion in loans from China over the past five years with hardly any interest and this latest charitable move of China to write off its $40 million debt was gladly welcomed by the African country.

Zimbabwe's President Robert Mugabe only has praises for China, saying that President Xi Jinping is a "true and dear friend of Zimbabwe."

Financial analysts, however, maintain that Zimbabwe's plans of using the yuan as its currency is nothing new at all.

Analysts say the yuan has been in use for two years by Zimbabwe together with the US dollar and African rand and it apparently does not stand a chance to the most preferred greenback for the consumers and traders.

Re-adopting the yuan right now "has no future at all," an economist said.

Analysts say consumers and traders will want to accept payments in dollars or the rand.

"There has been no yuan circulating in Zimbabwe for years now," said one analyst.

During President Xi Jinping's visit to Harare this month, he signed 10 economic agreements which included a $1billion loan to expand Zimbabwe's largest thermal station.

Tagsyuan, African rand, Zimbabwe