Luxembourg, the main international RMB centre in the Eurozone
As one of the only financial centres in the Eurozone with a significant volume of cross-border activities in Chinese Yuan, Luxembourg is already an important international RMB centre. Two of the largest Chinese banks, ICBC and Bank of China, have their European headquarters in Luxembourg and are constantly attracting Chinese companies interested in investing abroad. A third, China Construction Bank, announced the opening of a branch in the Grand Duchy in the near future.
The figures are impressive: 216bn assets under management in Yuan RMB, 30bn Yuan RMB in loans and 20bn Yuan RMB in deposits are currently managed in Luxembourg. Moreover, the first so-called “Dim Sum bond” outside of China was listed at the Luxembourg Stock Exchange in 2011. There are now 36 Dim Sum bonds quoted on the exchange with a total value of around 20bn RMB. Furthermore, 10 or more promoters have launched RMB-denominated sub-funds in the Grand Duchy. Trade clearing in these products is handled by Clearstream Luxembourg.
“We are one of the largest centres other than Hong Kong for the listing of Dim Sum bonds other than Hong Kong and Singapore”, Dariush Yazdani, partner at PwC Luxembourg, says. As an expert in international RMB matters, Dariush Yazdani points out that Luxembourg is not starting from zero regarding RMB products, since a number of banks in Luxembourg already offer their clients the full array of RMB products.
Despite the Eurozone crisis, relations between China and Luxembourg are prospering. “Luxembourg is the main recipient of Chinese Foreign Direct Investment flows to Europe” Mr. Yazdani says. In 2011, Chinese Foreign Direct Investments (FDI) to Luxembourg reached USD 1.86 billion, representing 43.5% of total Chinese investments to the EU.
Industrial and Commercial Bank of China (ICBC) and Bank of China (BoC) can only confirm this trend. Mrs Zhou Lihong, Deputy General Manager of Bank of China (Luxembourg) S.A., recently closed a deal with a Chinese company that will soon set up its head office in Luxembourg. “We are actively promoting the advantages of the Luxembourg financial centre to our clients”, she says, “such as its AAA rating and its status as the largest private banking centre in the Eurozone, the second largest investment fund centre in the world and the largest global Euro bond centre. The Luxembourg financial centre is already well known in China”.
Both BoC and ICBC specialise in corporate finance. “The Chinese government will hasten the implementation of the ‘going global strategy’ and encourage more enterprises from different fields to invest and operate overseas”, Gao Ming, Chairwoman of ICBC (Europe) S.A. in Luxembourg, says. “There is a very strong growth momentum for RMB business in Luxembourg”.
Mrs Gao also points out another important trust-building fact, namely the efforts of the Luxembourg government to position its financial centre as an international RMB hub. The famous “short distances” in Luxembourg between industry and the government when it comes to decision-making, as well as the good relations between the Chinese banks and the Luxembourg Ministry of Finance are mutually beneficial.
All three are confident that the international RMB business in Luxembourg can only increase. EA