China, South Korea agree to boost yuan, won use in trade

Reuters ^ | 7 hrs ago

[DeaconBenjamin]

Trade giants China and South Korea have agreed to utilise their currency swap valued at $59 billion to boost the use of yuan and won in bilateral trade, Seoul's finance ministry and central bank said on Tuesday.

Central banks of the world's largest and seventh largest exporters will begin lending trading firms yuan and won through banks from later this month for use in settling trade bills, the Ministry of Strategy and Finance and the Bank of Korea said in a joint statement.

"Using local currencies for trade settlement has been a global trend since the end of the 2008-2009 global financial crisis," Eun Ho-sung, deputy director general of the Bank of Korea's international department, told reporters. "We plan to arrange similar agreements with other countries after this."

The swap arrangement for 64 trillion won ($59.09 billion) or 360 billion yuan was established late last year to help boost the pool of currencies the two countries can tap into at times of stress in addition to official foreign reserves.

The Bank of Korea plans to hold discussions with companies in Seoul to explain the terms of new facility to provide loans with maturities of three or six months.

China buys about one-quarter of South Korea exports, and is its largest market, but payment made in yuan or won accounts for only about 3 percent as the bulk is settled in U.S. dollars.

[DeaconBenjamin]

Or, as Speigel describes it: China and South Korea forge alliance against the dollar

[HiTech RedNeck]

It’s hard to blame either one for not wanting to use a currency medium which at any moment could melt away in their pocket. Of course then the games between the two begin directly (Korea will begin to care about devalued yuans).

[Cringing Negativism Network]

The problem is, we are helping by buying so much from both countries.

BRING BACK US JOBS!

[MNGal]

I keep wondering how long China is willing to idly stand by and watch the United States devalue their currency with the printing presses.

Question: How would China be affected if the dollar was no longer the world’s reserve currency?

I have seen comments on FR that seem to indicate that China would be just as economically as the United States would be if this were to happen. Is that correct?

[Wuli]

we can thank Ben Bernanke and his printing presses for this; through trade we export the inflation he is creating

this causes domestic financial imbalances in the nations where our inflated dollars are being dumped;

with a broader basket of currencies on which South Korean trade occurs it will lesson the ill effects that may occur from any one nation’s currency South Korean trade is denominated in

it’s true, China and South Korea may benefit from this at our expense, but they are not the culprits, Ben Bernanke is