China Merchants Bank plans Luxembourg branch

Gramegna said the Grand Duchy has competitive advantages over other European financial centers.

China Merchants Bank's profit growth slows

Liquidity concerns abate for most Chinese lenders

As the world's second-largest investment fund center after the United States, Luxembourg has more than 3,800 investment funds that manage assets of 2.5 trillion euros ($3.4 trillion).

Through the nation, China can sell renminbi-denominated investment funds to a large pool of investors.

The Luxembourg Stock Exchange was the first exchange to list a dim sum bond (a bond denominated in yuan and issued in Hong Kong) in Europe in 2011. It has listed 46 such bonds with a volume of 32.9 billion yuan ($5.3 billion).

It is still in discussions with the People's Bank of China for renminbi qualified foreign institutional investor status, Gramegna said.

The RQFII program allows qualified financial institutional investors from overseas to invest in China's financial markets directly using the renminbi.

Nicolas Mackel, chief executive officer of Luxembourg for Finance (a public-private partnership between the Luxembourg government and the Luxembourg Financial Industry Federation) emphasized that Luxembourg is a small country but a big player - just like Singapore.

"Do not make the mistake of thinking because the country is small, the activities are small. We operate in the whole of the European Union. That is our market," Mackel said.