SEOUL, KOREA – Trading companies of Korea and China may be able to use the Korea-China currency swap fund for their transactions from mid-December at the earliest. The currency swap fund is estimated at 64 trillion won (360 billion Chinese yuan).
Once this arrangement is up and running, the companies in China and Korea won't need to pay their payables with dollars. For example, Korean importers may settle the deal with the yuan while Korean exporters may receive their receivables in won currency, thereby reducing currency risks and transaction costs for both sides.
The Bank of Korea and the Ministry of Strategy and Finance said on December 4 that they would introduce a scheme to support trading companies in the two countries by allowing them to settle their transactions in won and yuan currencies without the mediation of the dollar.
Last year, the volume of trade between Korea and China has been US$220 billion, 95 percent of which was settled in dollars. To address the problem of currency risk and transaction cost, the Bank of Korea has decided to use the yuan currency it has received from the People's Bank of China as part of the currency swap fund.
*Article provided by The Korea Economic Daily
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