Long-lasting strategic relationships
Luxembourg’s relationship with China predates efforts to internationalise the RMB. The Grand Duchy has enjoyed more than 40 years of bilateral diplomatic relations with China and it was in Luxembourg that the first overseas Chinese bank was established in 1979 after the founding of the People’s Republic of China in 1949.
Since then, Luxembourg’s ties with the Chinese authorities have only grown stronger and various cooperation agreements have been signed including a Double Tax Treaty in 1994, Memorandums of Understanding (MoU) between Luxembourg’s Central Bank and the People’s Bank of China in 2010 and between the CSSF and the CSRC in 2012. In fact, the number of meetings between high-level representatives on both sides has increased recently. Only this year, Minister of Finance Luc Frieden met with Chinese Finance Minister Xie Xuren, chairman of supervisory authorities of the financial sector, Mr. Shang Fulin of China Banking Regulatory Commission (CBRC) and Mr. Guo Shuqing of China Securities Regulatory Commission (CSRC) and Mr. Zhou Xiaochuan, the governor of the People's Bank of China. Jean Asselborn, Luxembourg Minister of Foreign Affairs also met with his counterpart, Ministry Wang Yi in Beijing in July 2013. Additionally, several high-level meetings took place with Luxembourg officials and representatives of Chinese Banks: Mr. Li Lihui, Vice Chairman and President of Bank of China (BOC), Mr. Yi Huiman, President of Industrial and Commercial Bank of China (ICBC) and more recently Mr. Wang Hongzhang, President of China Construction Bank (CCB).
The strategic relationship between China and Luxembourg is underscored by the decision of Chinese banks (BOC, ICBC and CCB) to set-up their European headquarters in the Grand Duchy. Developing Luxembourg as an entry gate to the European market for Chinese financial institutions is a strategic development axis for the Luxembourg government.
Luxembourg, the gateway between China and Europe
Aside from agreeable diplomatic relations with China and sizeable RMB deposits, favourable political and economic drivers unique to Luxembourg have created an environment that is advantageous to commerce. Recognized globally as an international financial centre, Luxembourg is home to hundreds of banks and fund companies from all over the world. It’s multi-lingual and multi-cultural environment simplify the process of facilitating complex international business transactions.
Within that context, Luxembourg is not only home to the European headquarters of the largest Chinese banks, it is also a favourite destination of Chinese investors in the EU. With a stock of approximately USD 9bn at the end of 2012,[3] Luxembourg is the main destination for Chinese Foreign Direct Investments (FDI) which account for nearly half of China’s total direct investments in the euro area.
China’s Outward FDI Stock in the euro area, 2012 (USD millions)

Source: MOFCOM 2012 Statistical Bulletin of China’s Outward Foreign Direct Investments
Luxembourg offers Chinese investors a sound business environment with strong expertise in cross-border transactions and suitable investment vehicles, e.g. “Société de Participations Financières” (“Soparfi), which is one of the most efficient holding companies in Europe.
Conversely, European investors are availing themselves of the Luxembourg investment centre, which has over EUR 2.5tn assets under management and is the second largest fund centre in the world behind the US, to invest in China: 30% of total European portfolio investments[4] in China and Hong Kong come from Luxembourg.[5]
Luxembourg is a leading international RMB centre.
High RMB activity and volumes in Luxembourg make the country the ideal platform for establishing the International RMB Centre in Europe. Three of the largest Chinese banks have chosen Luxembourg as a base from which to conduct and centralise their RMB activities, including trade finance, which highlights the importance of Luxembourg as the main RMB hub for the Europe as a whole.
With RMB 62bn in loans granted by banks in Luxembourg, roughly 40bn in deposits and almost RMB 220bn invested in funds domiciled in the Grand Duchy, the Luxembourg financial centre ranks first among those handling RMB business in Europe. International asset managers have established RMB funds in Luxembourg with a total of RMB 220 billion in assets under management. In addition, Luxembourg is the main domicile country in Europe for Chinese Equity ETFs.[6]  Luxembourg is also the largest RMB securities settlement centre and the leading listing place for RMB denominated bonds in Europe.[7]
Based on the hallmark cooperation and diplomatic ties between Luxembourg and China, an ideal and profitable solution for the internationalisation of the RMB would be an alignment of RMB activities in Luxembourg with Chinese authorities. The Luxembourgish government has put its full support behind RMB business development in the country.[8] Based on the hallmark cooperation and diplomatic ties between Luxembourg and China, an ideal and profitable solution for the internationalisation of the RMB would be an alignment of RMB activities in Luxembourg with Chinese authorities. The Luxembourgish government has put its full support behind RMB business development in the country.[9] We are confident that cooperation between China and Luxembourg will be further strengthened through this enterprise. Both countries have reason to be excited about the internationalisation of the RMB—a truly historic development.