A newly launched market with direct trading between South Korean won and Chinese yuan could help South Korea boost bilateral trade and transactions in the Chinese currency. U-Jean Jung reports.
On Monday, South Korea launched the won-yuan trading market, which means transactions can be made between banks in the two currencies, without going through the U.S. dollar. Choi Kyung-hwan, South Korea's Finance Minister, said the country has established the basic infrastructure to boost yuan transactions. (SOUNDBITE) (Korean) SOUTH KOREAN FINANCE MINISTER, CHOI KYUNG-HWAN, SAYING: "The yuan direct transaction market that opens today will serve as an important catalyst in boosting yuan trade in South Korea. It will improve trade convenience by eliminating one step in the transaction process and lowering transaction costs." In 1996, South Korea launched a similar currency market with the Japanese yen, but this resulted in a failure largely due to lack of demand. To keep history from repeating itself, today's central bank governor promised to actively respond to the imbalance between supply and demand in the market. (SOUNDBITE) (Korean) GOVERNOR, BANK OF KOREA, LEE JU-YEOL, SAYING: "We will actively work to ease the imbalance of supply and demand that is difficult for the market to solve on its own. And we will supply yuan obtained through the Korea-China currency swap to stabilize the market, if necessary." In November, the Bank of Korea selected 12 local and foreign banks as 'market makers' to nurture the new currency market, as it would need the extra support in the initial stage. (SOUNDBITE) (English) REUTERS REPORTER, U-JEAN JUNG, SAYING: "Opening this currency market makes South Korea the third country outside of China to host direct trading of the yuan against its own currency after Russia and Japan." Bilateral trade between Seoul and Beijing last year reached around 230 billion dollars, but only 1.2 percent of the transactions were denominated in the yuan. The South Korean government plans to raise that to 20 percent in the coming years.