Libya is moving to sideline the US dollar in its foreign trade, striking a deal that plugs its banks straight into China's financial plumbing. The two countries' central banks reached the understanding on Saturday, when Naji Mohammed Issa, Governor of the Central Bank of Libya, and Pan Gongsheng, Governor of the People's Bank of China (PBOC), agreed to link Libyan commercial lenders to China's payment and settlement network. The pact was sealed during Issa's trip to Beijing last week, part of a wider push to rewire trade with the Xi Jinping administration.
During the talks, officials from both sides reviewed how much commerce currently flows between them and mapped out ways to expand it. The centerpiece is Libya's entry into the Cross-Border Interbank Payment System (CIPS), the mechanism that pushes the yuan to the front and steadily trims the dollar's role.
How the yuan replaces the dollar
Once connected, Libyan and Chinese banks will be able to move yuan-denominated payments back and forth directly, without routing money through the third-party intermediary banks that traditionally sit in the middle of cross-border deals. That shift effectively strips the greenback of any function in commerce between the two nations. For Beijing, it lifts the yuan's standing; for Tripoli, it is a step toward spreading out both its economy and its reserves rather than leaning on a single currency.
Letters of credit and a deeper alliance
The two sides also agreed that letters of credit can now be issued directly through Chinese banks. Members of the visiting banking delegation described the arrangement as a "genuine strategic partnership", framing it as something that could reshape how Libya does business. Warmer ties with Beijing also position Libya to tap more money for infrastructure work, an area where China's Belt and Road Initiative (BRI) has grown especially popular across African nations.
Issa said the two central banks discussed opening a fresh phase of strategic cooperation, adding that hooking Libyan commercial banks into CIPS would make cross-border transfers simpler and smoother to carry out.
