Direct Transaction
The Seoul branch of the Bank of Communications of China announced on Nov. 23 that the daily average amount of direct clearing transactions between the Korean and Chinese currencies totaled US$2.5 billion this month whereas it had been about US$500 million to US$600 million during the early stage of the direct transaction market in December last year. The Bank of Communications had been designated as the only RMB clearing bank in Korea on Dec. 1, 2014.
The bank explained that such an increase is because an increasing number of entrepreneurs are opting for direct transactions in order to minimize their currency risks by not going through the U.S. dollar. “In addition, the demand from the general public is on the rise as well and more and more Korean companies are adopting this method in their business transactions between the main offices in Korea and their subsidiaries and branch offices in China, too,” it added.
It is expected that the size of direct clearing between the two currencies will continue to increase with time as the Chinese yuan is sure to be included in the SDR basket of the IMF within this year to have a greater influence in the international market as a key currency and the FTA between Korea and China is likely to promote international trade between the two countries. At present, the size of direct won-yuan transactions is equivalent to approximately 30% of that of direct transactions between the Korean won and the U.S. dollar.