Bank of Korea Taps 12 Banks for 2026 Won-Yuan Market, Deepening Non-Dollar Trade
The Bank of Korea has named 12 market-making banks for the 2026 won-yuan direct trading market, a move aimed at reducing U.S. dollar dependency and cutting costs in trade with China.
The push to bypass the U.S. dollar in trade between South Korea and its largest partner, China, is solidifying. On December 26, 2025, the Bank of Korea (BOK) announced its selection of 12 market-making banks that will lead the direct won-yuan trading market for 2026. This system is crucial for providing the liquidity needed for businesses to settle trades directly in their local currencies.
The Key Players for 2026
According to the BOK, next year's list includes seven domestic lenders and five foreign banks with local branches. The South Korean cohort consists of KB Kookmin Bank, NH Nonghyup Bank, Shinhan Bank, Woori Bank, Industrial Bank of Korea, Hana Bank, and Korea Development Bank.
The foreign banks selected are China Construction Bank, Bank of Communications, Industrial and Commercial Bank of China, Bank of China, and HSBC. These institutions are tasked with providing liquidity for both interbank and customer transactions, ensuring a stable market.
Why Direct Trading Matters
At its core, the won-yuan direct market is about cutting costs and mitigating risk. Previously, a Korean company doing business with China would have to convert won to dollars, and then dollars to yuan. Direct trading eliminates this costly two-step process, saving on transaction fees and reducing exposure to currency fluctuations.
"The market-maker system has contributed significantly to the successful establishment of the won-yuan direct trading market," the BOK said, adding that it's "expected to continue playing a crucial role in developing the market and expanding the use of the yuan."
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South Korean household excess funds reached 58 trillion won in Q3 2025, driven by rising income and strict lending regulations, according to the Bank of Korea.
The BOK projects private-sector employment to grow by 60,000 in 2026, driven by a recovery in private consumption, despite a slowdown in total job growth.
South Korea's foreign reserves fell by $2.6 billion in December 2025 to $428.05 billion, marking the first decline in seven months due to currency stabilization.