The Korean economy is expected to become more closely tied with
the Chinese economy following the International Monetary Fund's (IMF) decision
to include the Chinese yuan in key currencies, analysts said
Tuesday.
Businesses will increase settlements in yuan and
Korea may emerge as an important market for yuan
trading.
Lee Chi-hun, head of the China research team at the
Korea Center for International Finance, expects the use of the yuan to surge
tenfold to $50 billion in Korea's trade settlements by
2020.
"The use of the yuan could surge in Korea," he said,
citing the IMF's inclusion of the yuan in its key currencies, the Korea-China
free trade agreement (FTA) and the increasing number of Chinese tourists in
Korea.
The IMF decided Monday to add China's renminbi to the
basket of special drawing rights (SDR), which currently includes the dollar, the
euro, the Japanese yen and the British pound, beginning in October next
year.
The decision is expected to provide new opportunities
for the Korean economy, which has been closely tied with the world's
second-largest market.
Ma Ju-ok, an economist at Kiwoom
Securities, said the inclusion will strengthen the Chinese yuan in the long run,
with increasing demand for the currency in international settlements. Countries
will also want to include yuan assets in their foreign exchange
reserves.
He also said that this will help emerging
economies lessen their reliance on the dollar, providing them with a cushion
against external shocks.
"The fluctuation of the dollar will
have less effect on emerging economies. It means fewer discount factors for
emerging market assets," the economist said.
He also said it
will positively affect Seoul stocks in the mid-to
long-term.
However, he ruled out any immediate impact on the
financial market as the inclusion is next year.
The
government has been encouraging the use of the Chinese yuan, opening a won-yuan
direct trading market last year. Previously, businesses trading with China had
to change yuan to dollars and then dollars to won, but the new market gets rid
of such inconvenience.
One year since its launch, daily
transactions at the market averaged $3.6 billion as of last month, which
compares with mere $880 million a day last December. Settlements in yuan now
take up over 3 percent of the country's trade with China. The amount is expected
to rise fast following the globalization of the Chinese
currency.
The government is planning to go further to
encourage yuan transactions.
Choi Hee-nam, deputy finance
minister of international affairs, said at a conference Tuesday that the
won/yuan direct exchange rate will be used in the market from next year.
Currently, the arbitrage rate pegged to the U.S. dollar is used for won/yuan
transactions despite the opening of the won-yuan direct trading
market.
Seoul also aims at becoming an overseas hub for yuan
trading.
"The decision to include the yuan in the IMF's SDR
will be a paradigm shift where the yuan expands its international influence,"
Choi said. "We should be equipped with the capability and infrastructure to
seize opportunities amid this change," he added.
The deputy
minister said the government will increase efforts so that Korea can become an
overseas yuan trading hub, including the issuance of yuan-denominated foreign
exchange stabilization bonds and the expansion of yuan loans for Chinese firms
by Korean banks.
By Yoon Ja-young THE KOREA TIMES
Q1) When you heard word of "China", what remind you in mind at first? Let's talk about anything else.
Q2) For a while, many KOR students visited China to learn their culture and language. Do you happen to know anyperson who stuied or lived in China? if you know them, let's take a time to share thier experience and information about China.
Q3) Do you think more Korean students keep choose China to get their language skill instead of western countries speaking in English? Why do you think so?
Q4) finally, Yuan will becomes a key currency in the world from next year. their sharehold on basket of SDR is ahead of yen and pound currency. futhermore, reportedly, the chinese authorities centers on "One belt One Road" initiative and Asian Infrastruture Investment Bank(AIIB) for Asian coutries. What is their real objective? Let's talk about possible trivial impact from China upcomming the near future.
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