Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
More Korean firms pressed to make import payments in Chinese yuan
Inspectors from state-run Korea Agro-Fisheries & Food Trade Corp. prepare to collect samples from boxed napa cabbages from China at a storage managed by the company in Icheon, Gyeonggi Province, Sept. 30, 2024. Korea Times file
By Yi Whan-woo
Korean companies are increasingly being pressed to make payments in Chinese yuan when importing goods from China, as Beijing exerts increasing influence in global trade and seeks to undermine the dominance of the U.S. dollar, according to experts, Wednesday.
Korean exporters still mostly take dollars from Chinese buyers. But the Chinese currency can be used more frequently in long-term transactions if the greenback becomes weaker due to U.S. tariff policies and unstable monetary measures, they said.
The Bank of Korea (BOK) data showed yuan has gradually yet persistently increased its share among currencies used in Korean import payments.
Its share was merely 0.8 percent in 2018 but went up to 1.1 percent in 2019. The ratio was measured at 1.5 percent in 2020 and 2021 and then climbed to 1.7 percent in 2022, 2.4 percent in 2023 and currently is about 3.1 percent.
Accordingly, the total value of yuan-based import payments reached $19.5 billion in 2024, marking a nearly eightfold increase from $2.5 billion in 2014.
The findings came as the yuan has overtaken the euro as the world’s second most-widely used currency after the dollar.
It accounted for 7 percent of all global payments last year, according to data released by the Society for Worldwide Interbank Financial Telecommunication, a Belgium-headquartered cooperative aimed at efficient cross-border payment networks.
The ratio for the Chinese currency was higher than the euro's 6 percent, although it was still far lower than the U.S. dollar's 81 percent.
Shin Se-don, professor emeritus of economics at Sookmyung Women's University, noted that “a greater presence of yuan on international payments is heavily linked to China’s position as a leading global producer in raw materials as well as intermediary goods.”
“High demand for these goods worldwide gives Chinese sellers an advantage in choosing a currency they prefer, and buyers will have no choice but to comply with the demand," Shin explained.
He said the Chinese government especially finds financial transactions in yuan vital in the middle of a heightened trade war with the U.S. “Beijing will want to fully shift away from a dollar-dominated international trade environment and establish a separate, yuan-controlled trade network."
Hanyang University economics professor Ha Joon-kyung suggested that Korean exporters “will need to pay attention to yuan-based transactions, although the issue is currently not at the center of their business interests.”
The professor noted the yuan only makes up a 7.1 percent share in currencies that are used in Korean exporters’ deals with Chinese partners.
He then referred to concerns over the weakening of the dollar’s value in the wake of U.S. President Donald Trump’s aggressive tariff policy, adding that Trump badgered the U.S. Federal Reserve to cut interest rates, which also escalated concerns over the dollar's fall.
“No traders would want to use a currency if its value remains volatile and results in greater than expected exchange losses," Ha said.