It is expected that Korea and China will allow direct transactions between the won and the yuan after the bilateral summit meeting on July 3. In addition, the two parties are discussing the establishment of a yuan clearing bank in Korea for this purpose. If the plans turn out well, Korea can have a vantage point in turning itself into a yuan hub.
According to government sources, President Park Geun-hye and President Xi Jinping are going to announce economic cooperation measures, including the yuan plans, during the summit meeting.
If the direct transactions are allowed, Korean companies do not have to change money for trade with China, and they can save a lot on transaction costs such as exchange commissions. According to Standard Chartered Bank Korea, Chinese importers have saved 3 to 5 percent of their transaction costs by using the yuan as the settlement currency instead of the U.S. dollar.
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