South Korea Increases Significance as Offshore RMB Center

South Korea has jumped from 15th to 8th place since last year in SWIFT’s RMB (renminbi) Tracker, which measures the value of payments sent and received for RMB centers (excluding China and Hong Kong).

The data shows that South Korea’s RMB payments value increased by 563% between June 2013 and June 2014, and in June 2014, 68.9% of all direct payments between South Korea and China/Hong Kong were in RMB, up from 32.8% the year prior.

This jump in South Korea as an offshore RMB center is likely to continue, as the People’s Bank of China and Bank of Korea signing a memorandum of understanding (MOU) on July 3, 201, whereby the People’s Bank of China will designate an RMB clearing bank in Seoul. The two banks also agreed to further coordinate on RMB usage.

“The announcement by South Korea and China in early July about setting up a new RMB clearing centre in Seoul will further benefit the trading activities between the two countries. This agreement establishes South Korea as an important offshore RMB clearing center in North Asia,” says Michael Moon, head of payments, Asia Pacific, SWIFT.

Moon adds, “We have been monitoring the use of the RMB in South Korea for a while, observing its fast growth over the past two years, particularly as more banks and businesses are using the RMB in international transactions. South Korea’s RMB payments growth is increasingly driven by customer payments, which are a good proxy for trade settlement.”

Throughout the world, SWIFT’s data shows that the RMB remains the seventh most active currency for global payments, accounting for 1.55% of payments worldwide, while the U.S. dollar is the most active, accounting for 41.86% of payments. For the month of June, though, RMB payments value increased by 7.1%, while as a whole, all currencies increased in value by only 1.4% during that time.