The Chinese market for direct trading of the Korean won and Chinese yuan will be launched next week, the finance minister here said Friday.

The won-yuan direct trading market will start operation in Shanghai on Monday, with the state-run Chinese Foreign Exchange Trading System to take charge of the management, according to the Ministry of Strategy and Finance.

"South Korea and China are important trade partners for each other," Finance Minister Yoo Il-ho said in an official opening ceremony held in Beijing. "The newly launched currency trade market will bolster payment in trade between the two countries, trading and investment." He said it is expected to help reduce overall transaction costs in exchanging between the Korean won and the Chinese currency at a time when bilateral trade is growing.

Bilateral trade between South Korea and China reached US$227.4 billion last year, accounting for nearly one-quarter of the former's overall trade.
Currently, they have to use the U.S. dollar as a medium for trade settlement, a reason why businesses have to pay much higher costs in the process.

The Korean government earlier revised related laws to allow all Korean nationals and businesses to engage in any financial transactions in China using the local currency, including won-yuan spot trading and the settlement of accounts.

The Chinese won-yuan exchange market is a follow-up to a summit meeting between South Korean President Park Geun-hye and her Chinese counterpart Xi Jinping in October 2015.

The direct trade market in Seoul was opened in December 2014, with its daily turnover reaching an average $2.26 billion. (Yonhap)