“Luxembourg will become a leading RMB offshore centre in the Eurozone in the near future”
On the occasion of the LFF mission to Asia , a seminar called “Luxembourg, moving from a European to a global hub” was organised in Beijing on Wednesday January 16th. The seminar gathered more than 150 Chinese businessmen.
In his opening speech the Minister of Finance, Luc Frieden, said that the international dimension of the Grand Duchy despite its small size, was “the clear result of an economic and political will” that had resulted in Luxembourg being a founding member of various international insitutions including the European Union.
Today, Luxembourg is second in the world for assets under management in mutual funds and the number 1 wealth management center in the eurozone. It also hosts the corporate headquarters of ArcelorMittal, the world largest steel industry company and SES Astra, the world’s leading commercial satellite company.
The factors that have made Luxembourg a leading financial center include a multicultural, multilingual population and a government that supports economic development. “Luxembourg welcomes foreign investors and international financial actors and is, in this context, really open to Chinese investors”, said Minister Frieden.
Mr Frieden pointed out that China chose Luxembourg as its door into the European markets when, in the late 1970s, Bank of China opened its first branch in Luxembourg. Today, two other major Chinese banks (ICBC and Bank of China) have set up their European headquarters in Luxembourg and are expanding into Europe from this base. Minister Frieden announced that China Construction Bank would soon open a branch in Luxembourg (subject to official approval by the regulatory authority).
He spoke of the many opportunities for China and Luxembourg to do business together, which resulted in a Memorandum of Understanding (MoU) between the two countries in 2008. “The mutual fund sector in Luxembourg, which is clearly international, will offer a lot of interesting opportunities to Chinese investors in the future and will be an interesting opportunity for the Chinese economy to draw international funds to further expand. Based on that international experience, in particular as a leading fund management center, I believe that Luxembourg will become an leading RMB offshore center in the eurozone in the near future” said Minister Frieden.
Today, Luxembourg already has the largest pool of RMB on deposit and the Luxembourg Stock Exchange has one of the largest RMB denominated bonds listed in Europe.
Luxembourg and China have 40 years of diplomatic relations and also excellent economic cooperation. “ Luxembourg can offer a lot to China and Luxembourg can learn a lot from China” concluded Minister Frieden.
Sun Jie, chairman of the Asset Management Company of China (AMAC)
Mr Jie made a comparison between the Luxembourg and Chinese fund industries, pointing out that China’s fund industry had only existed for 15 years.
He explained that it was exactly 10 years ago that China had introduced its first investment fund law which had been amended the previous month. This amendment would lay down another milestone for China’s fund development in the future. One of the major features of the amendment is that it raises the standards for China’s human capital, he said. In the past, only big institutions or groups could set up a fund company or fund management firm, but now a person with 3 years of experience could meet the standards to launch and operate a collective investment scheme. “This will probably open a battlefield” said Sun Jie. “Three years from now, the Chinese fund industry will be booming and expand significantly and most of the human talents could join the Chinese fund industry”.
Sun Jie sees the future of the Chinese economy as booming. For the moment, more than 60% of the Chinese population resides in rural areas and is poor. Therefore, urbanisation is one of the biggest challenges. Sun Jie recalled the goal set by the Communist party at its last congress: “China is beautiful”. In order to achieve this goal, urbanisation is absolutely necessary and will be one the biggest opportunity for China as it will bring with it new construction contracts, higher consumption, new investments, etc. Also ,the next opportunity for China will be human development which was the source of tensions in the past.
Sun Jie concluded his speech by talking about the opening up of the Chinese capital market. After World War 2, China was forced to close up its economy until president Nixon visited China in the 1970s. Only after that, China opened up and international investors came in and China overseas investments began. Nevertheless, the capital markets were still closed until the last decade.
Since then, the opening up began very slowly and was certainly slower than expected because of the financial crisis but with the new administration of the communist party, which takes power in March, Sun Jie is convinced that the opening up of the market will now accelerate. Indeed, there is indeed already an official document stipulating that China will move gradually towards an objective of “more convertibility of the RMB”, he said. But this will not be an easy process as the Chinese capital market has always been protected from real competition. The pressure will be high, especially on Chinese banks, and the financial system is still a bit fragile, he admitted.
After these two key speeches, Fernand Grulms, CEO of Luxembourg for Finance, presented Luxembourg as a hub for financial services and a panel of specialists suggested how Luxembourg can contribute to the international reach of chinese asset managers. This was followed by a networking lunch.
In the final stage of this financial mission, the Luxembourg delegation is now heading on to Shanghai where a financial seminar will be held on Friday. VM
 The MoU was signed between Luxembourg’s Commission for the Supervision of the Financial Sector (CSSF) and the CBRC. It allows QDIIs to invest on behalf of their clients in financial products regulated by the CSSF. The MoU makes Luxembourg one of the few financial centers to have such an agreement and also makes it possible to distribute Undertaking for Collective Investment in Transferable Securities (UCITS) in the Mainland China through the QDII scheme.