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Korea-China Currency Swap Employed for Trade Settlement for the First Time
Yuan Currency Swap
Korea-China Currency Swap Employed for Trade Settlement for the First Time
  • By matthew
  • May 22, 2014, 05:50
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Chinese currency, the yuan.
Chinese currency, the yuan.

 

Hyundai Motor Company asked the Bank of Communications of China to provide an accounts receivable loan worth 124.72 million yuan (US$20.01 million) for its cars exported to China. 

This is the first case in which a Korea-China currency swap is employed for yuan-based trade settlements and a Chinese bank has used the currency swap agreement for big business in Korea. The bilateral financial exchange based on the currency swap is expected to expand through the state visit of President Xi Jinping to Korea. 

According to industry sources, the Bank of Communications of China provided the US$20 million loan by procuring it from a currency swap of US$56 billion, which is equivalent to 360 billion yuan. 

The replacement of the payment currency by Hyundai is to hedge its foreign exchange risk through the diversification of settlement means. These days, the yuan is emerging fast as a key currency, posing a threat to the U.S. dollar.