The internationalisation of the RMB is happening in two phases, argues Nicolas Mackel, chief executive of the promotion body Luxembourg for Finance. Trade settlement attracts most attention, but the RMB is also becoming an investment currency, and it is here that Luxembourg is playing a major role. This is because the Grand Duchy is a global expert for cross-border investment funds, bond listings, deposits and foreign direct investment into the EU.
What is the trend for asset managers coming to Luxembourg to access the Chinese market?
It is increasing very strongly, with asset managers of all backgrounds establishing funds here to tap into the pool of Europeans keen to invest in RMB and the higher returns available in China. Luxembourg is the second largest fund centre in the world after the US, and the largest cross-border fund hub. Funds are distributed to more than 70 countries from here thanks to our unique blend of an open attitude backed up by innovative service providers staffed by experienced, multinational people.
Now Luxembourg has an RQFII quota, how do you see things developing?
Even before we were granted the RQFII quota operators used Luxembourg to establish funds using quotas from Hong Kong, Singapore, and London. This is because the Luxembourg product is the most popular of its kind in the market, and we have unrivalled expertise. Now we have our own quota worth just over USD 8bn and this has opened new possibilities.
Luxembourg is the leading dim sum bond centre outside Asia.
Yes. Our stock exchange was the first outside Greater China to list an RMB-denominated bond and we remain the leader outside Asia. We have more than 50 years experience listing international bonds, so we were the natural choice for corporates and sovereigns. Some European countries have issued RMB-denominated debt, and we are considering this move ourselves. However, compared to corporate debt, sovereign debt is relatively modest.
How does Luxembourg help Chinese businesses invest abroad?
We are the preferred investment destination for Chinese investment into Europe, with nearly half of the regional total flowing through Luxembourg. It is always a good time to invest in Europe, but never more so now that the euro is low and assets are cheap. Europe has what Chinese investors are seeking. This might be technology, know-how or brands, German mittelstand, French technology or Italian design. Then there are infrastructure projects for long-term returns. Whatever the strategy, Europe has many options.
Fintech is a growing area. How is your country reacting?
Promoting financial services and information technology has been government policy for many years, so we have been able to adapt to the specific needs of new fintech business models. We have expertise in systems, software, risk management, reporting, regulatory compliance, analytics, so we can cope with all requirements. China has, in the recent past, given a lesson to the world in this area. Just look at what Alibaba did with Yu’e Bao, their investment fund linked to their database of online shoppers. Tencent is also interesting with its unique mobile apps for banking.
How does Luxembourg position itself globally?
Very often, people just look at the big financial centres, but we provide high quality, tailored services in our areas of speciality. London is the leader in foreign exchange, and Germany for trade, but for investment and deposits Luxembourg is the place. The proof is that the six largest Chinese banks either have their European HQs here, or are about to open one.