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More cross-border trade in Chinese RMB as economy grows


South Korea, which sends around a quarter of its exports to China, is one of the few countries in the world to run a trade surplus with the Asian giant.


South Korea gets components and resources from China and sends back semiconductors, machinery, cars, ships, mobile phones and television sets. In March, South Korea enjoyed an $8.4 billion trade surplus. Last year, trade between the two countries added up to $290 billion.


Both countries want more of this trade to be done in yuan, which would make trade cheaper by avoiding the need to convert funds into US dollars or euros before completing trades.


Earlier this year, South Korea became one of the newest offshore yuan trading centers.


South Korea is not alone in pushing to do more business based on the Chinese currency, particularly in Asia where the Chinese mainland is the largest trading partner of many countries in the region. In fact, rare is the country in the region that is not working hard to take a larger chunk of yuan-denominated business.


The yuan's momentum will get a fillip if the International Monetary Fund includes the currency in its Special Drawing Rights basket in October.


This would make the yuan one of just five global currencies included in this elite pool of global reserve currencies. At the moment, the SDR includes the US dollar, the euro, the British pound and the Japanese yen.


There are more than 60 central banks around the world that invest in the yuan, and China has currency swap agreements with 30 countries. As of April, currency swap deals had added up to 3.14 billion yuan ($500 million).


In Asia and surrounding regions, the Chinese mainland has agreements with South Korea, Malaysia, Indonesia, Singapore, New Zealand, Uzbekistan, Mongolia, Kazakhstan, Russia, Thailand, Pakistan, Australia, Sri Lanka, Qatar and Nepal as well as the Hong Kong and Macao special administrative regions.


Malaysia, Indonesia, Singapore and South Korea have emerged as key players in global yuan markets, complementing the strengths of Hong Kong, Macao and Taiwan, and acting as a springboard for a more overseas reception for the yuan.


And as the dollar has appreciated against other international currencies, the yuan has remained steady and is now closer to being fairly valued than it has ever been.


For the time being, the overall dominance of the dollar in world trade is assured. The greenback is by far the most used reserve currency in the world, but the yuan has emerged as a well-priced alternative.


A number of disparate factors suggest that the influence of the yuan is only likely to grow.



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