South Korea media is reporting that Korea and China plan to establish direct trading between the won and the yuan, which would eliminate the need to exchange either currency into U.S. dollars when settling accounts. This is a continuing trend we have been witnessing as China has recently been liberalizing their currency market with greater fervor.
Senior presidential secretary for foreign affairs Ju Chul-ki on Wednesday said Chinese President Xi Jinping will sign around 10 agreements with Korea bolstering bilateral business relations, including direct currency exchange.
Korean officials forecast that Xi will also grant Korea the Renminbi Qualified Foreign Institutional Investor (RQFII) status, which allows unprecedented access to Chinese onshore equity and fixed income securities markets. The RQFII scheme permits certain licensed international investors to participate in China’s mainland financial exchanges. Experts project Korea’s RFQII investment ceiling at 80 billion yuan.
Recently, the U.K. was granted RQFII status with an 80 billion-yuan ceiling. Hong Kong has a 200 billion-yuan ceiling and Taiwan 50 billion yuan.