Luxembourg reinforced as Europe's RMB hub
Minister of Finance Mr. Pierre Gramegna is leading a delegation of 70 top executives from the financial and related sectors to China. Reinforcing strengthened ties between the two countries, on the first day of his visit to Beijing, Minister Gramegna welcomed the signing of a Memorandum of Understanding between Luxembourg's Central Bank and the People's Bank of China, setting the framework for a future designation of a Renminbi clearing bank in Luxembourg.
Minister Gramegna underlined the importance of this new step towards the internationalisation of the Chinese currency and welcomed this agreement as a recognition of the important role the Luxembourg financial center plays in this context. Today Luxembourg is already the leader in many Renminbi related activities and hosts the European headquarters of the largest Chinese banks.
Moreover, Minister of Finance Mr. Pierre Gramegna announced: “China Merchants Bank has decided to start the process of setting up in Luxembourg, thereby further confirming Luxembourg’s role as the prime European hub for Chinese banks. Luxembourg continues to prove that despite our small size, it is a major partner for China. The Grand-Duchy offers an internationally-oriented business hub, well-positioned to efficiently support the activities of Chinese banks in the European market. We have been pleased to host Bank of China, ICBC and China Construction Bank and welcome this new player coming to Luxembourg.”
Finally, Minister Gramegna attended the signing ceremony of a Memorandum of Understanding between the Asset Management Association of China (AMAC) and Luxembourg’s Investment Fund Association (ALFI). The agreement between AMAC and ALFI focuses on developing activities to create mutually beneficial opportunities for the fund industries in both countries. Luxembourg is the second largest investment fund industry in the world after the United States and the largest in Europe. It is a valuable partner for the Chinese asset management industry in its strive to diversify internationally.
In just a short time, the RMB has become one of the world’s most in-demand currencies and the internationalisation of the Chinese yuan has created the need for convenient hubs in Europe. With its historical roots in international finance, Luxembourg has been at the forefront of this development. Luxembourg's Stock Exchange was the very first Stock Exchange outside Greater China to list a bond denominated in Renminbi. That was in May 2011 for Volkswagen AG and since then 45 multinational companies and sovereigns have used the Luxembourg Stock Exchange to fulfill their Renminbi liquidity needs.
Examples of Luxembourg’s leadership in Renminbi business include:
- Luxembourg holds the largest pool of RMB deposits in Europe (RMB 79.4 billion by the end of the first quarter of 2014 and a 24% increase compared with the 2013 Q4);
- Largest securities hub in Europe (RMB 635bn by the end of 2013)
- Largest RMB loan portfolio in Europe (RMB 73bn by the end of the first quarter 2014, showing an increase of 36%)
- Largest RMB trade finance volume in Europe (RMB 86.8 billion by the end of 2013)
- Leading listing center for RMB dominated bonds in Europe (44 listed bonds worth RMB 30.6 billion by the end of May 2014)
- Leading RMB fund center in Europe (RMB 261.8bn by the end of the first quarter 2014). As the world’s largest investment fund centre, Luxembourg heads this business field in Europe.
- The most significant development can be registered in RMB securities settlement volumes. On a year-on-year basis, figures increased by 247% to 408bn RMB. Securities are held by various international financial institutions from all over the world, from which the largest portfolios are held by investors from Hong Kong (28.4%), Singapore (27.0%) and Macau (26.0%).