S.Korea, China agree to launch Won-Yuan trading market in Seoul

The series of agreement had a great meaning as a package of institutional base for ample supply and demand for the Chinese currency was completed rapidly and comprehensively through the summit meeting between Park and Xi, the presidential office said.

Xi hails South Korea's growing international influence

South Korea eyes China's financial market

The base for active transactions between the two currencies will benefit companies of both countries and boost bilateral trade and investment.

South Korean companies will save conversion costs such as exchange commission by directly converting the yuan into the won, with no need to undergo a process of exchanging the yuan for the US dollar before swapping the US dollar into the South Korean currency.

Settlement costs will reduce as South Korean companies can use Chinese clearing banks in Seoul, while Chinese firms will benefit from falling foreign exchange risks by settling trade with the yuan.

It will also reduce South Korea's dependence on the US dollar for settlement in trade with China. The two neighbors have used the US dollar as the main settlement currency because the yuanand the won are not exchangeable fully in the global market.

The reduced costs were anticipated to further speed up bilateral trade, which has already reached a landmark level.

Two-way trade between China and South Korea totaled $274.25 billion in 2013, amounting to South Korea's trade volume with the United States and Japan combined. It was a 55-fold expansion since the two nations set up diplomatic ties in 1992.

China has become South Korea's largest trading partner, largest market of exports, largest source of imports and biggest destination of overseas investment, while South Korea was China's third-biggest trading partner and fifth-largest source of foreign investment in 2013.

Seoul and Beijing set off negotiations for the bilateral free trade agreement (FTA) in May 2012. To date, 11 rounds of talks have been held.