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China invites Korea to join Asian Infrastructure Investment Bank
Two leaders agree to set up yuan clearing bank in SeoulBy Korea Herald
Published : July 3, 2014 - 21:15
The Chinese government recently requested for the Seoul government to consider taking part in the new institution, tentatively named the Asian Infrastructure Investment Bank, sources close to the matter said.
Beijing is hoping Seoul will accept the invitation and agree to participate during the first official visit by Chinese President Xi Jinping to Seoul this week, according to the sources.
It appeared that Seoul has yet to make up its mind on Beijing’s offer, despite the fact that the partnership could give it more say and influence within the new international bank.
The establishment of the bank was not mentioned in the joint statement issued by the two leaders on Thursday.
Experts say participation in the infrastructure investment bank could help South Korea prepare for a possible reunification of the two Koreas, which would require a massive amount of funds for infrastructure.
They also added, however, that the U.S. remains a major obstacle barring the nation’s participation in the China-led project. South Korea’s main ally has reportedly expressed “deep concern” about Seoul’s participation, which it views as being a part of efforts by Asia’s biggest economy to reshape the global financial architecture to ensure its power and interests are reflected.
Some also claim that the new multilateral bank will rival established institutions, including the World Bank and the Asian Development Bank, that are under the sway of the U.S. and Japan.
Meanwhile, Presidents Park Geun-hye and Xi Jinping agreed Thursday to allow direct transactions between the won and the yuan. They also agreed to designate a clearing bank in Seoul for overseas trading of each other’s currencies, following their summit in Seoul.
Up until now traders had to use the U.S. dollar as an intermediate currency, which adds to transaction coasts.
To set up the yuan clearing and settlement arrangements, the Bank of Korea signed Thursday a memorandum of understanding with the People’s Bank of China, the BOK announced.
In addition to the direct-trade deal, China also agreed to grant South Korean financial institutions quotas worth a total of up to 80 billion yuan ($12.87 billion) for investing in China’s domestic capital market.
The deal, signed under China’s Renminbi Qualified Foreign Institutional Investor scheme, will allow Korean financial institutions to invest in Chinese stocks, bonds and money-market products, according to the joint-statement issued Thursday.
By Oh Kyu-wook (email@example.com)
Articles by Korea Herald
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