A series of recent news headlines has once again pushed the China-Africa relationship into the limelight.

On the negative side, the kidnapping of 29 Chinese workers (now released) in Sudan, and the deaths of five Chinese in an explosion in the Republic of Congo raised serious concerns for the safety conditions of Chinese nationals working in Africa on projects sponsored by the Chinese government and state-owned enterprises.

On the positive side came news that Nigeria, the most populous African country, added US$500 million in Chinese renminbi (RMB) to its reserves and plans to buy upwards of seven times more that amount. Such an action sends a positive signal to Chinese companies doing or planning business in Africa, despite significant inherent risks.

As the first country in Africa to take such steps to participate in the RMB’s internationalisation, Nigeria’s move could be more significant than many have thought. Sure, the oil exporter’s decision might be partially influenced by S&P’s downgrade of the US credit rating, as well as by the eurozone debt crisis. But the real push comes from ever-closer economic ties between the two countries.

Last year, China’s loans and exports to Nigeria surpassed $7 billion. Aside from conventional investments in oil, recent transactions involving Chinese investors in the country include rice processing plants and airport development projects. As the Chinese currency becomes more freely convertible in the open market, experts predict that other African nations will follow Nigeria’s lead, starting with oil producers with large foreign exchange reserves. In fact, South Africa, the strongest economy on the African continent, is already looking at the possibility of following suit.

Chinese banks in Africa are set to benefit from this growing link in foreign exchange. Since International and Commercial Bank (ICBC) acquired 20 per cent of South Africa-based Standard Bank in 2007, Chinese banks have been expanding aggressively and trying to lay a strong operating franchise across the continent. Bank of China, China Construction Bank and ICBC have all assembled strong teams, built strategic alliances with local players and extended their contest for market share into Africa.

Bank of China, the earliest to set up a branch in Johannesburg, which is often taken as the financial hub of the continent, has over the past year seen its loan business grow 60 per cent, trade finance grow 160 per cent and cross-border RMB settlement business grow a whopping 40 times.

It’s clear to me that a virtuous cycle is being formed. As an increasing number of companies in China discover Africa’s economic potential, and invest in or trade with it, demand for RMB as a currency of exchange rises, which boosts the growth of Chinese financial institutions in Africa and, in turn, finances even bigger waves of Chinese firms rushing to Africa.

If the past two decades can be said to represent the golden period of Chinese capital flows to Africa in terms of government-led aid and infrastructure investments, we may well see Chinese services start to dominate the bilateral relationship in the coming decade. Banking services provided by Chinese institutions stand out as the area we should all be watching.