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China’s Financial Sector opts for Luxembourg as its European Hub
Minister of Finance Pierre Gramegna announces Alipay and Agricultural Bank of China will set up in the Grand Duchy
Shanghai, China – 3rd July, 2014: As Luxembourg continues to grow as an RMB and e-payments hub in Europe, today the Minister of Finance Mr. Pierre Gramegna announced at a seminar in Shanghai that Alipay, one of the major online payment platforms in China, will establish its European entity in the Grand Duchy of Luxembourg.
Luxembourg Minister of Finance Mr. Pierre Gramegna, who is leading a delegation of 70 top executives from the financial and related sectors to China explained: “We are delighted to welcome Alipay to Luxembourg where it will join other leading innovative e-payment companies such as Paypal and Amazon Payments. This is a strong reflection of Luxembourg’s position as a modern, dynamic banking hub which provides an environment for e-commerce companies to thrive. We have a long, trusted history as an international financial centre in Europe and today we are a leading centre for the RMB outside China. We are well-placed to support this currency on its internationalization journey and we are looking forward to further developing our historical role in the financial sphere as a bridge between China and Europe.”
Luxembourg Deputy Prime Minister and Minister of the Economy Etienne Schneider, who visited Alipay headquarters in Hangzhou in December 2013 together with HRH the Crown Prince of Luxembourg, stressed the growing interest of Chinese companies in Luxembourg: “Led by the main banks such as Bank of China and ICBC, an increasing number of innovative companies are choosing Luxembourg as their base to enter the European market.” PrimeMinister Xavier Bettel added: “The investments in ICT infrastructures made by the Government over the last decade give us a cutting edge as a hub for ICT companies and we are pleased to welcome Alipay into our growing family of Luxembourg-based e-commerce specialists.”
Minister Gramegna also announced during his speech in Shanghai that the Agricultural Bank of China (ABC) is in the process of setting up its EU headquarters in Luxembourg. During a meeting with the leadership of ABC the progress to use Luxembourg as their hub was discussed. He explained “Five of the six largest Chinese banks have chosen Luxembourg as their hub in Europe confirming its attractiveness as an entry gate into the European Union’s Single Market. With these new financial players from China, Luxembourg will also further increase its leadership as a European Renminbi hub.”
Earlier this week, Luxembourg’s Central Bank and PBoC signed a Memorandum of Understanding setting the framework for a future designation of a Renminbi clearing bank in Luxembourg. In Beijing, the Finance Minister participated in the signing ceremony of a Memorandum of Understanding between the Asset Management Association of China (AMAC) and Luxembourg’s Investment Fund Association (ALFI) and announced the decision of China Merchants Bank to set up in Luxembourg. It will join the Bank of China, ICBC and China Construction Bank.
In just a short time, the RMB has become one of the world’s most in-demand currencies and the internationalisation of the Chinese yuan has created the need for a convenient hub in Europe. With its historical roots in international finance, Luxembourg has been at the forefront of this development. Luxembourg's Stock Exchange was the very first Stock Exchange outside Greater China to list a bond denominated in Renminbi. That was in May 2011 and since then 45 multinational companies and sovereigns have used the Luxembourg Stock Exchange to fulfill their Renminbi liquidity needs.
Examples of Luxembourg’s leadership in Renminbi business include:
- Luxembourg holds the largest pool of RMB deposits in Europe (RMB 79.4 billion by the end of the first quarter of 2014 and a 24% increase compared with the 2013 Q4);
- Largest securities hub in Europe (RMB 635bn by the end of 2013)
- Largest RMB loan portfolio in Europe (RMB 73bn by the end of the first quarter 2014, showing an increase of 36%)
- Largest RMB trade finance volume in Europe (RMB 86.8 billion by the end of 2013)
- Leading listing center for RMB dominated bonds in Europe (44 listed bonds worth RMB 30.6 billion by the end of May 2014)
- Leading RMB fund center in Europe (RMB 261.8bn by the end of the first quarter 2014). As the world’s largest investment fund centre, Luxembourg heads this business field in Europe.
The most significant development can be registered in RMB securities settlement volumes. On a year-on-year basis, figures increased by 247% to 408bn RMB. Securities are held by various international financial institutions from all over the world, from which the largest portfolios are held by investors from Hong Kong (28.4%), Singapore (27.0%) and Macau (26.0%).