SEOUL, Dec 4 (Reuters) - Trade giants China and South Korea have agreed to use their currency swap agreement valued at $59 billion to boost the use of the yuan and won in bilateral trade, Seoul’s finance ministry and central bank said on Tuesday.
Central banks of the two countries will begin lending trading firms yuan and won through banks from later this month for use in settling trade bills, the Ministry of Strategy and Finance and the Bank of Korea said in a joint statement.
The swap deal for 64 trillion won ($59 billion) or 360 billion yuan was formed late last year to help boost the pool of currencies the two countries can tap into at times of stress in addition to official foreign reserves.
China is South Korea’s largest export market, taking in about one-quarter of the smaller neighbour’s total overseas sales, but payments made in yuan or won accounted for only about 3 percent as the bulk of it was settled in U.S. dollars.
China is the world’s largest exporter and South Korea the seventh-biggest, with the two accounting for a combined 13 percent of the world goods exports last year, World Trade Organisation data shows.
China has signed a series of bilateral currency pacts with a number of foreign countries as part of efforts to promote the use of the yuan in cross-border trade and investment. ($1 = 1083.1000 Korean won) (Reporting by Christine Kim; Editing by Choonsik Yoo & Kim Coghill)