A promising future—Luxembourg is the platform for further RMB business growth

Due to the Belt and Road Initiative (BRI) and the “Going (even more) Global” policy, the European Union (EU) has emerged as a key destination for Chinese foreign direct investment (FDI).



Laurent Berliner - [Sponsoring] Partner - Advisory & Consulting - Deloitte

Petra Hazenberg - Partner - Advisory & Consulting - Deloitte

Pascal Martino - Partner - Advisory & Consulting - Deloitte

Francesca Messini - Director - Advisory & Consulting - Deloitte

Lynn (Yun-Chen) Cheng - Senior Consultant - Advisory & Consulting - Deloitte

Published on 12 November 2020

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Due to the Belt and Road Initiative (BRI) and the “Going (even more) Global” policy, the European Union (EU) has emerged as a key destination for Chinese foreign direct investment (FDI). In recent years, Luxembourg is being increasingly recognized as a key hub for cross-border Renminbi (RMB) business in the Eurozone, a gateway to the EU, and a platform for further RMB business growth.

Luxembourg is one of the leading European centers for RMB payments, deposits and loans, RMB investment funds and listing of Dim Sum bonds, as well as providing access to data and information on the Chinese domestic green securities listed and traded on the Shanghai Stock Exchange (SSE) or on the Chinese Interbank Bond Market (CIBM). According to Pierre Gramegna, Luxembourg’s Minister of Finance, “Luxembourg is actively helping to transform the RMB from a trade into an investment currency.”

In this article, we will share an overview of Luxembourg’s RMB business ecosystem, how Luxembourg is positioned compared to other European RMB hubs, and how COVID-19 has affected Luxembourg’s RMB business.


Even before the BRI, Chinese investors sought strategic assets overseas, particularly in Europe’s advanced economies. The distribution of Chinese investment in the EU has broadly followed its pre-BRI patterns, and most of it is attributable to a few large mergers and acquisitions (M&A) transactions.

From 2010 to 2018, the “big three” economies of the United Kingdom (UK), Germany and France received the most Chinese investment in the EU. However, in 2018, two newcomers made it to the top five: Sweden and Luxembourg. Sweden was Chinese investors’ second preferred destination, with EUR3.4 billion of total investment (driven by Zhejiang Geely’s EUR3 billion investment in Volvo AB), while Luxembourg came in fourth at EUR1.6 billion [1] (mostly attributable to Legend’s acquisition of Banque Internationale à Luxembourg).

The year 2018 also saw Chinese firms invest heavily in key sectors across Europe and make several high-profile acquisitions, including stakes in most of the UK’s leading banks, Sweden’s largest carmaker, robotics in Germany, power utilities in Portugal, solar farms in Hungary, and Greece’s Piraeus port. However, investment declined in transport, utilities and infrastructure, and real estate. The biggest increases were recorded in financial services, health and biotech, consumer products and services, and the automotive sector.

In 2019, northern Europe [2] supplanted the big three as the top region for the first time since 2010, receiving 53 percent of all Chinese investment. This was mainly due to a few large M&A deals, including Anta’s acquisition of Amer for EUR4.6 billion in Finland, China Evergrande’s investment in NEVS for EUR830 million in Sweden, and Wuxi Biologics’ investment of EUR325 million in a state-of-the-art greenfield manufacturing plant in Ireland.

Chinese FDI Transactions in the EU by Country, 2000-2019 Cumultative Value, EUR Billion

Source: Rhodium Group,


Luxembourg plays an important role in the internationalization of the RMB and serves as a bridge between China and the Eurozone for trade, investment and capital movement. Seven Tier 1 Chinese banks have based their European headquarters in Luxembourg.

In 2011, the first Dim Sum bonds were listed on the Luxembourg stock exchange (LuxSE) and since then, the growth has been tremendous. Since June 2019, there are 119 bonds listed on the LuxSE, placing Luxembourg as the top country in the global market for Dim Sum bond listings [4]. Many international companies are using Luxembourg for their global fund strategy. The Luxembourg Green Exchange (LGE) is one of the major stock exchange markets raising significant cash for investment into Chinese sustainable finance. Based on LuxSE statistics, the LGE already displays 25 Chinese Green bonds, including 16 Chinese domestic securities.

In September 2014, the Industrial and Commercial Bank of China (ICBC) Luxembourg was designated as an RMB clearing bank. This allows RMB payments to be cleared directly through ICBC, improving cost efficiency and transaction speed. In May 2019, the LuxSE admitted ICBC as a trading member, aiming to provide liquidity for fixed-income securities denominated in RMB and to facilitate trading volumes for US Dollar- and Euro-denominated bonds issued by the Chinese government and corporations.

In addition, more than 1 percent of the total amount of the assets under management (AUM) in the Luxembourg fund industry is invested in RMB assets, representing a total amount of USD49.3 billion (out of a total of USD4.8 trillion) [5]. From 2015 to Q1 2019, the amount of RMB assets held in Luxembourg-domiciled investment funds has almost doubled from RMB207.8 billion to RMB392.6 billion [6]. As of Q2 2019, domiciled Renminbi Qualified Foreign Institutional Investor (RQFII) funds in Luxembourg have already more than EUR5 billion AUM. This amount has surpassed the value of AUM by UK RQFII funds (EUR39 million) and Irish RQFII funds (EUR597 million). Luxembourg is definitely a key hub for worldwide investors to get exposure to the Chinese market.

In terms of Chinese investments in Luxembourg, Chinese FDI in Luxembourg has soared over the past 10 years, recording a cumulative value of EUR2.4 billion in 2019 and making Luxembourg a key Chinese FDI destination in Europe.


The fact that some of China’s largest banks have chosen Luxembourg further illustrates its attractiveness as a key financial hub in Europe. As of today, seven Tier 1 Chinese banks and several key Chinese FinTech players have chosen to base their European headquarters in Luxembourg and offer their various products through their local branches in the EU. This trend seems to be increasing, as other Chinese players continue to consider Luxembourg as a base from where they can develop their European business. Thanks to their presence in Luxembourg, they have increased their corporate banking business as well as their payments business.

Luxembourg is one of the top 15 offshore RMB economies by weight, with Hong Kong having the largest market share at 71.59 percent, followed by the UK at 6.04 percent [7]. However, Luxembourg ranks as the top jurisdiction in the global market for Dim Sum bond listings as of June 2019 with a percentage of 25.6 percent market share, ahead of jurisdictions like Hong Kong (7.1 percent), the UK (21.9 percent) and Ireland (5.8 percent) [8].

In terms of the investment fund industry, Luxembourg is the second largest investment fund center after the US, with more than EUR4.6 trillion of net AUM as of Feb 2020 [9]. It has consolidated its position as the leader in cross-border distribution, with Luxembourg investment funds distributed in more than 70 jurisdictions around the globe. The UCITS brand, while providing strong investor protection through the regulation and supervision of Luxembourg’s financial supervisory authority (the Commission de Surveillance du Secteur Financier, or CSSF), allows asset managers from around the world (as well as from China via their subsidiaries in Hong Kong) to benefit from reputable products that carry EU passports for cross-border distribution.

Luxembourg was the first EU jurisdiction to authorize the use of an RQFII quota back in 2013 for UCITS funds, and the People’s Bank of China granted Luxembourg an RMB RQFII quota of RMB50 billion (about EUR6.3 billion), lower than the RMB80 billion quota granted to Frankfurt, Paris and London respectively. In January 2019, the CSSF and the Hong Kong Securities and Fund Commission (SFC) signed a mutual recognition of funds agreement, which was a key step for improving the cross-border distribution of retail funds to the public in both jurisdictions. So far, about 50 Luxembourg umbrella funds and almost 1,000 sub-funds are currently distributed in Hong Kong [10].


It is not difficult to predict that, due to the current health crisis and pandemic, there will be a downward trend of the global economy in 2020. According to the Q1 2020 quarterly statistical release of the European Fund and Asset Management Association, the total net assets of all European UCITS and alternative investment funds declined by 11.6 percent in Q1 2020. Specifically, ISS Market Intelligence has observed a sharp decrease in the number of assets held by Luxembourg funds cross-bordered in China, from USD6.280 million in January 2020 to USD5.026 million in March 2020.

However, as the take-off of Chinese green finance is a long-term trend, it is believed that LGE could continue to play a key role despite the pandemic. And, regarding Chinese FDI in Luxembourg, we should also maintain our confidence. During the COVID-19 crisis, the Bank of China participated in Luxembourg’s state-guaranteed loan scheme together with non-Chinese banks. This illustrates Chinese banks’ willingness to serve the local and economic needs of the Luxembourg market on top of their international activities.

How Luxembourg can further expand RMB business across Europe


[1] Source: Rhodium Group (RHG) and the Mercator Institute for China Studies (MERICS). [2] Estonia, Denmark, Finland, Ireland, Latvia, Lithuania, and Sweden. [3] Seven Tier 1 banks including Bank of China, China Construction Bank, Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of Communications, China Merchants Bank and China Everbright Bank. [4] Source: Luxembourg For Finance. [5] Source: 2019 Monterey Report. [6] Source: Commission de Surveillance du Secteur Financier, CSSF. [7] Source: May 2020 Swift RMB tracker report. [8] Source: Bloomberg and LuxSE. [9] Source: Association of the Luxembourg Fund Industry, ALFI. [10] Source: Luxembourg For Finance LEO magazine, June 2019.


All this RMB growth and investment mean we expect that Luxembourg will remain a leading location for RMB business growth and continue to be attractive for Chinese investors. Going forward, we expect Luxembourg and China to further strengthen their relationship, to the mutual benefit of their respective economies.

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