[THE INVESTOR] The Chinese market for direct trading of the South Korean won and Chinese yuan will be launched next week, the South Korean Finance Minister said on June 24.

The won-yuan direct trading market will begin operations in Shanghai on June 27. The state-run Chinese Foreign Exchange Trading System will take charge of the management.

“South Korea and China are important trade partners,” 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 also expected the market to help reduce overall transaction costs in exchanging between the Korean won and the Chinese currency.

Bilateral trade between South Korea and China reached US$227.4 billion last year, accounting for nearly one-quarter of Seoul’s overall trade.

Currently, they must 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 South Korean government earlier revised related laws to allow all South 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 opened in December 2014, with its daily turnover reaching an average $2.26 billion.

(theinvestor@heraldcorp.com)