World Business

S Korea jittery on currency changes

By Ding Qingfen (China Daily)
Updated: 2010-04-28 11:28

Hwan-Elk Cho said appreciation of the yuan would not necessarily benefit the South Korea economy.?

Hasty yuan revaluation would have impact on economic stability

BEIJING - A revaluation of the Chinese currency would harm the economic growth of South Korea and the stability of the Chinese economy, a high-level official from South Korea told China Daily on Tuesday.

Hwan-Eik Cho, president and CEO of Korea Trade-Investment Promotion Agency, made the remark on the sidelines of the two-day 4th Chinese Outbound Investment Forum in Beijing.

He also urged Chinese enterprises to invest more in South Korea as a way to "balance the China-South Korea trade", as China has been running trade deficit with South Korea for years.

"The appreciation of the yuan would not necessarily do any good to the development of the South Korean economy", and on the other hand, "it will have direct impact on the stability of Chinese economy", said Cho.

Therefore, China should not make any hasty decision on the issue, he added.

The Korea Trade-Investment Promotion Agency is a non-profit organization assisting South Korean enterprises in the promotion of trade and investment activities.

"The appreciation issue is a double-edged sword for South Korea," said Zhan Xiaohong, a professor at the Economy Research Institute of the Chinese Academy of Social Sciences.

"It would boost its exports to China and markets where South Korea and China have been competing against each other", but "a great number of South Korean companies investing in China would see drop in sales and many jobs would be lost", Zhang explained.

China is the largest recipient of South Korean investment. Last year, South Korean enterprises invested $2 billion in China, but investment from China in South Korea was only $160 million.

According to Cho, more than 20,000 companies including from South Korea have established factories in China, and their output is mainly for export.

In addition, South Korea and other Asian nations will be forced to revaluate their currencies if the yuan gets stronger, making it impossible for South Korea to benefit from a Chinese currency revaluation, said a report from the Korea Trade Association.

Earlier, Japanese Finance Minister Naoto Kan warned that openly pressuring China on currency flexibility would not work, and Bank of Japan Governor Masaaki Shirakawa said exchange rates should not be used as a tool to fix trade imbalances.