South Korea aims to catch up with Hong Kong as one of the leading renminbi financial hubs, a senior finance ministry official said Friday.
Delivering a keynote speech at the Renminbi Internationalization seminar hosted by Deutsche Bank in Seoul, Vice Finance Minister Joo Hyung-hwan said the country has made considerable strides in the last year to build up the necessary infrastructure to service transaction demands.
South Korea began Renminbi Clearing Bank operations on Nov. 6, and its won-yuan direct exchange market started doing business on Dec. 1. The country has also received a solid 80 billion yuan ($12.7 billion) in renminbi qualified foreign institutional investor (RQFII) quota that can facilitate portfolio investment in China.
“The (RQFII quota) is a reflection of the close ties between Korea and China, as no other country that has consulted with China regarding clearing banks, RQFII and other infrastructure has been given such a favorable start,” the official claimed.
China is South Korea’s largest trading partner and ranks No. 2 as the destination of foreign direct investment after the United States. This makes direct renminbi transactions attractive to the country.
South Korea’s tech giant, Samsung Electronics Co., is set to start making settlements in yuan when trading with China starting Monday.
Data showed that since Beijing started pushing for cross-border renminbi settlement in 2009, the currency has gained a foothold as a medium of settlement, investment and reserve currency, with the International Monetary Fund to decide whether it should be included in the Special Drawing Rights basket of reserve assets.
This year, local think tanks as well as the Bank of Korea and Financial Services Commission will conclude joint studies on further measures to use renminbi in trade settlements, Joo said.
The results will be announced in June.
The official emphasized that a progressive approach is needed because if the country sticks to existing transaction practices, it will never see itself as a renminbi hub or be able to compete on an even footing with early starters.
“With the relentless efforts of financial institutions providing various renminbi services and creating networks with their clients, Korea could walk shoulder to shoulder with Hong Kong in the near future,” he said. (Yonhap)
