Samsung's yuan-won trading plan a boost to Seoul's yuan hub ambitions

Technology giant Samsung Electronics gave a big boost to Seoul's ambitions to become a global hub for the offshore yuan business, saying it was preparing to start trading the Chinese currency directly with the South Korean won.

The news came as the South Korean government announced that it hoped to sign a final free trade agreement with China within the first half of the year. South Korea became the third country in the world to begin direct trading of the yuan for a local currency in December under the aim of grabbing a larger share of the growing business opportunities involving the yuan outside China.

"This is an encouraging development given that one of the weaknesses on the market was the low demand or supply from the corporate sector," said Song In-chang, head of the finance ministry's international finance bureau. "I hope Samsung's plan to participate in the market will influence other big companies also to join."

Samsung said in a statement it was "looking into starting won-yuan direct trading". It did not elaborate, but traders said such a move would be a big boost for the market, which until now has been in operation led by banks designated as market-makers.

"The fact that there's real demand and supply for commercial purposes carries a big significance even though the amount is small," said one currency dealer at a local bank.

Over the long term, the yuan-won rate closely tracks the calculated price from each currency's value against the US dollar, but companies can save costs and reduce the risk from exchange-range volatility in the meantime. South Korea has been encouraging firms trading with China to settle transactions with the yuan or the won instead of the US dollar, but actual use of the local currencies in trade deals remains very low.