Luxembourg: an ideal RMB destination in Europe
The internationalisation of the Renminbi is a trend and Luxembourg wants to play an important part in that process. The country wants to become the main international RMB centre in the Eurozone. In that context, the Bank of China is aiming to become Luxembourg RMB clearing bank.
The jump to the top is only a question of time. Renminbi, the official currency of the People’s Republic of China, will not only become a major international payment currency but also the official reserve currency of many countries. Emerging from the development of a global financial market, and accelerated by the financial crisis, the balance of power between economies has shifted. Consequently, the RMB will inevitably join the US Dollar and the Euro as a reference currency of the global monetary system.
Luxembourg’s ambitions are clear: to become the main RMB centre for cross-border business in the Eurozone. The conditions to reach this goal are respectable. From a business perspective Luxembourg has a recognised international finance centre, offers a sizeable pool of RMB investment funds and listed bonds, and can count on the presence of one of the largest clearing and settlement platforms, namely Clearstream.
But there is more to it: Luxembourg is a stable member of the Eurozone, has a long-lasting relationship with the Chinese government and major Chinese banks have established their European headquarters in Luxembourg.
Recently, a delegation of Bank of China, led by Chairman Tian Guoli, met with senior government officials including Luxembourg’s Minister of Finance Luc Frieden. In a press release by Bank of China, it is underlined that “Bank of China shares its ambition with officials to become the first Luxembourg RMB clearing bank, providing full support to the development of RMB businesses in Luxembourg”. At the same time, Bank of China finds a business-friendly environment and a proactive attitude by officials to enhance internationalisation of the RMB. The bank’s Luxembourg branch has been active in the Grand Duchy since 1979. By the end of May 2013, the Bank of China, Luxembourg had reached 8.9 billion in RMB deposits, 13 billion in RMB loans, and 38.3 billion as the total cross-border RMB clearing amount.
At the end of May 2013, ICBC bank hosted a conference in Luxembourg to present international RMB services, with Minister Luc Frieden as special guest. In a press release, the International and Commercial Bank of China notes that, “ICBC will leverage its strong RMB capital and global network to fully support Luxembourg to become an international RMB centre”. Luxembourg, via ICBC Europe, will be the hub for the bank’s branches in Europe to promote these services. In 2012, ICBC Europe provided loans for cross-border trades totalling RMB 10.82 billion and involved in cross-border transactions totalling RMB 25.957 billion.
According to ICBC figures, Luxembourg has 20 billion in RMB deposits – the largest amount in the Eurozone – 30 billion in RMB loans and 200 billion in RMB assets managed by fund companies in Luxembourg. All in all, RMB business in Luxembourg has posted an impressive growth in recent years. CW