Luxembourg well positioned for further growth in renminbi internationalization

This week, Luxembourg for Finance hosts three seminars in China for bankers and fund managers aimed at driving greater strategic cooperation in the field of international finance.

The Luxembourg delegation will travel to Beijing, Shanghai and Shenzhen and is composed of 80 executives from the financial sector, including Marc Lauer, Chairman of the Luxembourg Financial Sector Federation (PROFIL) and the Luxembourg Insurance Industry Association (ACA), Yves Maas, Chairman of The Luxembourg Bankers’ Association (ABBL), Camille Thommes, Director General of the Association of the Luxembourg Fund Industry (ALFI), Serge De Cillia, CEO of The Luxembourg Bankers’ Association (ABBL), Marc Hengen, CEO of the Luxembourg Insurance Industry Association (ACA), Robert Scharfe, CEO of the Luxembourg Stock Exchange, and Nicolas Mackel, CEO of Luxembourg for Finance.

Six major Chinese banks have chosen the Grand Duchy of Luxembourg as their EU hub to serve the needs of their Chinese clients doing business in Europe as well as their European clients doing business in China. The strong presence of these banks underlines Luxembourg’s role as one of Europe’s key renminbi centres. Building on its cross-border expertise, Luxembourg has become Europe’s leading centre for RMB investment fund products and Dim Sum bond listings.

The internationalization of the renminbi is arguably the most significant development in global financial markets since the creation of the Euro. In a short period of time, the renminbi has become the world’s 5th most used international currency, with profound implications for investors. As Chinese capital markets open up, Luxembourg is at the forefront of changes that will help investors capture the benefits of the currency’s internationalisation.

As economic growth within China settles at a sustainable level, the international use of the renminbi offers many opportunities to global financial centres, which have seen volumes ramping up quickly.

The Luxembourg Stock Exchange is prepared for a significant increase in the issuance of RMB bonds, with strong interest being shown by retail investors as well as institutions and corporate players. The Luxembourg Stock Exchange is the leading exchange of Dim Sum bonds listed in Europe, ranking 4th worldwide behind its Asian peers.

Luxembourg is the largest investment fund centre in the world after the US. Benefitting from an RQFII quota, Luxembourg is in pole position among financial centres in facilitating international RMB investments.

Luxembourg is also playing an important role in product innovation, particularly in the field of RMB funds, where it holds the largest value of RMB investment funds, with RMB 296.3 billion. Already in November 2013, the Luxembourg regulator (CSSF) authorised the first RQFII UCITS and in November 2014, the CSSF granted the first permission to a UCITS fund to invest through the Shanghai-Hong Kong Stock Connect.

A proposal to extend Stock Connect to Hong-Kong Shenzhen is being considered, which would for the first time allow foreign investors to trade the next generation of Chinese companies, including software, high-tech, and biotechnology stocks, via the Hong Kong exchange. This can only add to the growing demand for RMB.

The direction of travel is clear, both in terms of the scale of the Chinese capital markets and the potential benefits for investors, who increasingly will choose Luxembourg as an entry point for China. At the same time, thanks to its international outlook, unrivalled cross-border financial services expertise and open mind to innovation, Luxembourg has proven the important role it plays as China’s bridge to Europe.

Facts and figures

The Luxembourg financial centre has consolidated its number 1 position for RMB-denominated funds (RMB 296 bn, April 2015) and bonds (61 bonds worth over RMB 36bn, September 2015).
Luxembourg has over 40% of market share of Dim Sum bonds in Europe and is the forth-largest Dim Sum bond listing centre worldwide.
Luxembourg ranks first with regard to RMB loans deposits outside of Asia.
Six Chinese banks are using their Luxembourg hub for cross-border RMB activities throughout Europe.
In September 2014, China designated ICBC as the RMB clearing bank in Luxembourg. In April 2015, Luxembourg was granted a RQFII quota.
In 2014, Luxembourg organised the very first international conference on renminbi business in Europe.
Luxembourg is the leading financial centre in the Eurozone (GFCI ranking, March 2015)