Zimbabwe announced last week that it would shift to the Chinese yuan as its reserve currency.A reserve currency is a foreign currency held in large quantities by governments and financial institutions to pay international debts."Reserve currency is held in order to support the value of national currencies," writes Justin Kuepper, international investing expert, on the website International Invest.Patrick Chinamasa is Zimbabwe's Minister of Finance and Economic Development. He said China agreed to cancel about $40 million of Zimbabwe's debts this year.He also said the move was a sign of the friendship between China and Zimbabwe, a poor country in southern Africa.It is also a sign of the growing economic ties between China and Zimbabwe. China is Zimbabwe's largest foreign investor, with interests ranging from construction and energy to telecommunications.Local economists said Zimbabwe is flooded with foreign currencies since the inflated Zimbabwean dollar collapsed in 2009.
