Luxembourg wants bank for yuan deals

Luxembourg Minister of Finance Pierre Gramegna said the state would benefit from having an official clearing and settlement bank for yuan transactions and a Renminbi Qualified Foreign Institutional Investors quota.

Gramegna said on Wednesday he will visit China in either June or July and express these two wishes to the Chinese government in the hope they will be fulfilled.

Gramegna was speaking at The Luxembourg Renminbi Forum, a one-day event attracting 300 financial experts from all over Europe, and the first of its kind in Luxembourg.

The announcement shows Luxembourg's eagerness to become an offshore renminbi hub, in competition with other Western financial centers such as Paris, Frankfurt, London and New York.

Just last week, British Chancellor of the Exchequer George Osborne announced the British and Chinese governments are in active discussions about setting up a clearing bank in London for the yuan. He said London will also host a large-scale international forum on the renminbi this summer.

The RQFII program, which allows qualified financial institutional investors overseas to invest in China's onshore financial markets directly using the renminbi, is a step toward the Chinese currency's internationalization.

First launched in 2011 and tested in Hong Kong using a quota of 20 billion yuan ($3.3 billion), RQFII funds grew to 270 billion yuan by the end of 2012. An RQFII quota of 80 billion yuan was also granted to London last year.

An official clearing bank facilitates the efficient clearing of offshore renminbi transactions, achieved through the appointed bank's direct cooperation with the People's Bank of China.

Having an official clearing bank also allows more liquidity for the offshore renminbi center that hosts the bank. Moreover, it bears symbolic significance for the offshore renminbi center in that it has recognition from the Chinese government.

Gramegna added that he hopes to stress Luxembourg's achievement in growing renminbi businesses over the past few years during his upcoming trip to China, pointing out the large volume of the currency's businesses that Chinese banks already conduct in Luxembourg.

Currently, Bank of China Ltd, Industrial and Commercial Bank of China Ltd and China Construction Bank Corp all host their European headquarters from Luxembourg, playing a major role in growing the offshore renminbi pool in Luxembourg.

According to official figures as of December 2013, Luxembourg has the largest pool of renminbi in the eurozone with 64 billion yuan in deposits, 53.8 billion yuan in loans, 24.7 billion yuan in renminbi bond listings and 256.4 billion yuan in renminbi-denominated assets held in investment funds.

Renminbi trade finance in Luxembourg in 2013 was 86.8 billion yuan.

There are now 44 renminbi bonds listed on the Luxembourg Stock Exchange. In comparison, the London Stock Exchange has listed only four.

Nicolas Mackel, chief executive officer of Luxembourg for Finance, a government agency, added Luxembourg plays an important role in helping the renminbi to internationalize, particularly in helping it to move from a trade currency to an investment currency.

He said Luxembourg's abundance of renminbi investment products attracts a large pool of offshore yuan, while renminbi transactions in Luxembourg help to grow the liquidity of the currency as an investment option.

cecily.liu@chinadaily.com.cn