Today, Luxembourg is the most important hub for cross-border RMB business in the Eurozone. Being the largest fund centre in the world after the US, Europe’s leading international bond listing platform and the premier private banking center in the Eurozone, Luxembourg has a remarkable expertise in financial services. As one of the few remaining European countries with a AAA rating, it also offers a stable political and economical environment. These facts cater significantly to Luxembourg’s development as a major RMB hub.
Hubs will be crucial for the global expansion of the RMB offshore market providing for higher acceptance of the currency for trade and settlement. Moreover, within the hubs private initiative and market demand drive innovation and move away from the constraints of officially supplied liquidity.
RMB offshore hubs develop in a more independent way from the onshore market and eventually expand as platforms for “pure offshore” transactions. It is in this spirit that the Luxembourg financial centre is developing actively its renminbi activities.
- the leading European financial centre in terms of RMB loans and deposits;
- the only country in Europe with RMB denominated investment funds;
- the leading listing place for RMB denominated bonds in Europe and the third largest worldwide;
- Europe’s largest hub as regards RMB securities settlement volumes.
Luxembourg institutions have an impressive track record in cross-border activities. The Luxembourg Stock Exchange (LuxSE) was the first to launch a Chinese Sovereign bond in 1994. The first RMB-denominated bond by a European issuer (Volkswagen) was listed at the LuxSE in 2011. In 2014, the first RMB bond by a Chinese mainland company issued in the Eurozone was listed in Luxembourg.
Many of the major international asset managers, as well as the biggest Chinese players in this industry, have launched renminbi-denominated investment funds in Luxembourg. Luxembourg’s asset management industry is an important driver in the development of RMB investment funds.
Luxembourg’s responsive government and regulator have already encouraged the five Chinese banks ICBC, Bank of China, China Construction Bank, Bank of Communications and Agricultural Bank of China to set up their European headquarter in Luxembourg. Furthermore, China Merchants Bank has set up a branch. With the designation of ICBC as a clearing bank, Chinese authorities have confirmed Luxembourg’s stance as a major RMB hub.
Indeed, Luxembourg is the ideal entry gate for international players into the EU single market. Some 70% of the EU’s wealth is concentrated within a 700 km radius around Luxembourg, which makes the country a prime location for cross-border investment. Over many decades, Luxembourg has developed a unique financial centre ecosystem with a high level of cross-border expertise, which includes essential market infrastructures, such as the Luxembourg Stock Exchange and post-trade service providers such as Clearstream, family offices, insurance companies, lawyers, tax experts, consultants, auditors, accountants as well as a specific regulatory framework that allows banks to outsource IT and operational processes to service providers that are fully regulated by the financial sector supervisor.