South Korea and China agreed to conclude their bilateral free trade negotiations by the end of this year, Cheong Wa Dae said Thursday.
The bodies also agreed that Korea would be able to set up an offshore renminbi trading center in Seoul, enabling clearance and settlement of trade between the two countries in Chinese currency, while Korean institutional investors have been given an 80 billion yuan quota to use Chinese money for mainland equity purchases.
This series of deals came after President Park Geun-hye and Chinese President Xi Jinping met for a summit in Seoul on Thursday. Korea’s presidential senior economic adviser Ahn Jong-beom said the two sides would continue to engage in their 12th trade negotiations this month, covering a wide range of issues from investment and services to tariff concessions and intellectual property.
The Korean government said that both countries would aim to seal a “comprehensive and high-quality” deal that protected the country’s agriculture industry by the year’s end.
The two sides started their free trade talks in 2012, and reached the first phase of their agreement concerning the timeframe of tariff reductions for goods classified as sensitive and less sensitive. Those that are “highly sensitive” to both sides have been omitted from their negotiations.
Cheong Wa Dae added that the two countries will soon select a Chinese bank operating in Seoul as the renminbi clearing and settlement bank after the Bank of Korea and the People’s Bank of China reach an agreement on details of establishing the offshore yuan trading in Korea.
This would enable Korean and foreign financial companies to issue yuan-denominated bonds in the near future, the Korean government noted.
The two sides also agreed to set up a center in China that can clear and settle payments in Korean won in phases as the Korean currency further gains recognition as global money.
China has been pushing to internationalize the yuan to reduce its dependence on the dollar by allowing the establishments of offshore currency trading centers with much of renminbi clearing and settlements being done in Hong Kong.
But it has not yet fully liberalized its currency and capital markets as a means to control capital flows to maintain the weakness of the yuan for export competitiveness.
This is part of the reason China imposes investment quotas on foreign institutional funds or investors, analysts said.
The two sides also agreed to strengthen their partnerships in key strategic industrial areas such as biotechnology, materials and renewable energy.
By Park Hyong-ki (email@example.com