Luxembourg's financial expertise helps Chinese firms to engage with Europe
The importance of the renminbi as a global currency is growing and several financial capitals are competing to take advantage of the situation. While Hong Kong continues to be the undisputed leader in the race to become an offshore renminbi hub, Luxembourg has emerged as the leading platform in the eurozone.
Luxembourg has the largest volume of renminbi in terms of deposits, loans, listed bonds and assets in mutual funds in Europe. With Luxembourg UCITS, collective investments in transferable securities, offering a channel to access Chinese securities, the attractiveness of the Grand Duchy as a portal to investment in China has grown. That growth extends beyond the financial sector into all manner of business, from e-commerce to aerospace. Four of China's top banks have established their European headquarters in Luxembourg with two more set to follow.
Li Suosheng, CEO of China Construction Bank Europe, which opened its offices in Luxembourg in 2013, summed up the attraction of the Grand Duchy. "In some large countries you will find that national interest can play a part when regulations are drafted or applied," he said. "However, in Luxembourg there is no difference if your head office is inside or outside the EU. The rules are clear and are applied in a predictable fashion," he added.
Nearly half of Chinese foreign direct investment into the eurozone is channeled through Luxembourg thanks to this open approach. More could be on the way. "I believe that China will accelerate its international expansion and often it is better to organize this investment through a Luxembourg company," said Didier Mouget, the managing partner of professional services firm PwC Luxembourg.
Luxembourg is the world leader in cross-border investment funds, with expertise that has attracted renminbi-fund promoters. Already assets to the value of 300 billion yuan ($48.31 billion) are based in the Grand Duchy. On April 29, the People's Bank of China announced that Luxembourg funds would be able to invest 50 billion yuan directly into the Chinese economy. This access to the "renminbi qualified foreign institutional investor scheme" is regarded as a major step forward.
Luxembourg is also the most important exchange center outside Asia for renminbi denominated "dimsum" bonds, with more than 60 issuances valued at 35 billion yuan currently. About 40,000 listed securities are on the exchange. "Being listed on the Luxembourg Stock Exchange is a proof of quality," explained the exchange's CEO Robert Scharfe. Since listing the first eurobond more than 50 years ago, the bourse has become a world leader in the international bond market. "Players in the global financial system know that we have a stringent admission process and that we are well regulated, a vital ingredient for a successful listing."
