BEIJING - China announced on Friday it will allow direct trading between the Chinese yuan and the won of the Republic of Korea (ROK) on its inter-bank foreign exchange market from Monday.

The move will lower exchange costs, facilitate use of the two currencies in trade settlement and investment, and boost bilateral financial cooperation, the China Foreign Exchange Trade System said in a statement.

China and the ROK signed a free trade agreement in June 2015 after three years of negotiations. Under the deal, the two countries will eliminate tariffs on more than 90 percent of traded goods within 20 years.

China is the ROK's largest trading partner. Bilateral trade stood at $240 billion in 2014 and is expected to reach $300 billion in 2016.