The Chinese yuan hit a 19-year high against the U.S. dollar in April. This indication that the currency is appreciating should breathe new life into China's offshore dim sum bond market after a surprisingly subdued 2012. African nations, among other countries, are developing an appetite for yuan-denominated securities, nicknamed dim sum after the popular Hong Kong bite-sized dishes served in steamer baskets or on small plates.

Trade between China and Africa reached a record-breaking $198.5 billion in 2012, increasing 19.8 percent from the $166.3 billion recorded in 2011, according to China's Ministry of Commerce. Standard Chartered expects China-Africa bilateral trade volume to top $325 billion by 2015, which will provide a strong foundation for the growth of yuan trade settlements.

Over the past 15 years, trade growth between China and Africa has increased faster than China's trade with the rest of the world. China is Africa's largest trading partner, so it makes sense for African governments and companies to hold assets denominated in yuan.

According to Standard Chartered analyst Sarah Baynton-Glen, African demand for Chinese capital goods and manufactured exports will be driven by investment in infrastructure, oil and gas exploration, and the continent's growing consumption. Meanwhile, Chinese policy banks' ongoing investment in Africa, with numerous infrastructure- and resource-related projects already under way or in the pipeline, will provide underlying momentum for further bilateral trade growth.

"Given these trade trends, ever-closer diplomatic and financial links with China, and a drive by Chinese policy banks to increase use of the yuan in Africa, we believe that yuan trade settlement will likely increase significantly from current levels," Baynton-Glen said in a note to clients.

Yuan trade settlements

In 2010, only 3 percent of China's foreign trade was settled in yuan. By 2012 that figure had risen to more than 15 percent, and the Chinese currency was ranked 13th among all global currencies in terms of popularity. However, use of yuan in Africa is still small. Last year, yuan settlements accounted for just 0.5 percent, or $1 billion, of trade transactions between China and Africa. But with the huge trade base between the two sides, yuan settlements could easily be boosted. Standard Chartered forecasts that yuan trade settlement volume in Africa will reach $38.5 billion by 2015, or 10 percent of projected China-Africa trade in 2015 (see chart 1).