South Korea's FinMin Yoo Il-ho says China will manage slowdown to soft landing

Liza Tan | Executive Producer
This is the big concern for South Korea: FinMin

We're not heading for another global financial crisis or even a hard landing in China, South Korea's finance minister and deputy prime minister has exclusively told CNBC's Eunice Yoon.

Speaking as the G-20 meeting wrapped up in Shanghai on Saturday, South Korea's Minister for Strategy and Finance Yoo Il-ho said said that while he was concerned about volatility in emerging markets and the possibility of a broader crisis, he did not believe the probability of a global financial meltdown was very high.

He also said that he was confident about the Chinese leadership's ability to manage its economic slowdown.

"They're well experienced and I believe that they will handle this situation," Yoo said.

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Doubts over China's growth outlook have grown since the country's market rout last summer and the surprise devaluation of the yuan in August. As host country of the G-20 this year, China was at pains during the meeting of finance ministers and central bank governors in its financial captial last week to reassure the group it had control of its economy and currency.

Yoo said he anticipated a soft landing for the Chinese economy; a key factor for Yoo's own economy, which is heavily reliant on China buying its goods. In January, South Korean exports fell by nearly 20 percent from a year earlier to post the worst performance since the 2008-2009 crisis and preliminary data for the first 20 days of

February signaled continued weakness.

"Chinese officials expect an approximately 6.5% growth rate this year, and if that is true, then the impact of the slowdown [on South Korea's economy] will be limited," Yoo said.

Yoo said he had some worries about the weakening yuan but added that its negative impact on the Korean won would ultimately depend on the rate of the Chinese currency's decline.

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After surprising markets with a sharp yuan devaluation in August, and setting off fears of competitive devaluations by other countries, China repeatedly reassured last week's G-20 meeting that there would be no further big moves lower for the yuan.

"If the speed of depreciation is not that fast, then the impact will be limited," Yoo said.

Geopolitical risks including a potential Brexit and Europe's refugee crisis also featured prominently on the G20 communique. While the threat of a nuclear North Korea was not mentioned, it remains a risk to the South's economy.

Yoo Il-ho, South Korea's finance minister, speaks during a news conference in Seoul, South Korea, on February 22, 2016.
SeongJoon Cho | Bloomberg | Getty Images

Yoo said that the impact depended on how long the current standoff with North Korea lasted. The isolated state has infuriated its neighbors since the start of 2016 with a hydrogen bomb test and then a missile test. Washington presented new, tougher sanctions for North Korea to the UN Security council last week, in a draft resolution the U.S. negotiated with Pyongyang ally Beijing.

"We have to wait and see the results of the sanctions against North Korea...we have to look of that detailed sanction measures. If that is effective, then this risk will be lessened," Yoo said.

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