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| Martin Tricaud, president and chief executive of HSBC Korea, listens to questions from reporters at a press conference at the Lotte Hotel in central Seoul, Wednesday. The topic was the bank's offshore yuan business plans. / Courtesy of HSBC Korea |
By Choi Kyong-ae
HSBC, a London-based financial group, is making a strong push to gain a bigger share in Korea's burgeoning won-yuan direct exchange market.
On Wednesday, the chief of the British company held a press conference in Seoul for the first time in five years as it sees direct trading between the Korean won and the Chinese yuan a new growth engine.
"We believe that given its geographical proximity with China, and the importance of its economic and trade links with China, Korea can become one of the most successful renminbi (RMB) centers in Asia and globally," Martin Tricaud, president and chief executive for HSBC Korea, told reporters.
In July, Korea and China signed an agreement to promote greater use of the yuan, or RMB, as the Chinese currency is increasingly being used in cross-border transactions with China.
China has been Korea's biggest trading partner since 2004 and accounted for one-fourth of the latter's exports in 2013. Korea posted a trade surplus of $62.8 billion from trades with China last year. Economists expect a stable inflow of yuan into Korea as the Chinese economy has big growth potential.
RMB deposits in Korea's banking sector now reach around 123 billion yuan, 20 percent of the country's overall foreign currency reserves, according to the Bank of Korea.
Also supporting the RMB deposits, China and Korea are in negotiations on the free-trade agreement. The bilateral deal, if signed, would push up RMB payments further, economists said.
As part of efforts to "do more and better" in Korea, Tricaud said HSBC will not only make stronger ties with local companies and financial companies but also to develop the offshore yuan business.
He said HSBC's global networks will help Korean corporate customers particularly when they expand into overseas markets. "The 21st century will be the century of the RMB," following the era of the dollar in the 20th century.
But Justin Chan, co-head of HSBC's Asia-Pacific Markets, warned of challenges regarding the offshore yuan business.
"There is a lot of more volatility in terms of the Korean won versus the yuan compared to the Korean won versus the dollar. And therefore we need tools in the spot or forward markets to manage the risks in the foreign exchange side," Chan said.
Under the July agreement, Korea also obtained an 80 billion yuan ($13 billion) quota for domestic investors to buy securities in China under the Renminbi Qualified Foreign Institutional Investor (RQFII) program.
Under the agreement, the Bank of Communication was designated as a yuan clearing bank in Seoul and sales of yuan-denominated debts in Seoul became available. HSBC expects yuan-denominated debts will likely to be sold within this year.
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