S. Korean firms still lukewarm to yuan due to lack of convertibility

By Kim Young-gyo HONG KONG, Sept. 27 (Yonhap) -- South Korean firms are still lukewarm about using the Chinese currency for trade settlement due to its lack of full convertibility, a South Korean banker said Tuesday. "Many South Korean companies in Hong Kong are reluctant to adopt the yuan," said Kim Hak-myung, Hong Kong branch general manager of South Korea's state-owned Industrial Bank of Korea. His remarks were made at a parliamentary inspection of administration affairs held at the South Korean consulate general in Hong Kong. "We see a great inflow of the yuan into Hong Kong, but the firms do not know where to use the currency as they cannot exchange the yuan with other currencies freely," Kim said. He did, however, add that a growing number of South Korean importers and exporters are starting to show their interest in using the Chinese currency. China, which eclipsed Japan as the world's No. 2 economy this year, has been seeking to reduce its reliance on the U.S. dollar and promote the yuan as a global currency. However, the world's No. 2 economy currently does not have full capital account convertibility and maintains regulatory control that limits the trade of its currency at market rates. Such measures have resulted in the currency lacking liquidity, the most important quality necessary for a currency to be recognized as a medium of exchange around the world.