Europe's Foremost Renminbi Hub

  1. What are the continuing efforts to internationalise the renminbi? What is the role of Luxembourg in this process?

    On June 28 2014, a memorandum of understanding (MOU) on renminbi clearing arrangements in Luxembourg was signed between the central bank of Luxembourg (Banque centrale du Luxembourg) (BCL) and China's central bank, the People's Bank of China (PBOC). A renminbi clearing bank will soon be designated in Luxembourg. This evidences a further step in China's efforts to internationalise the renminbi.

    Currently, Luxembourg is the leading centre for renminbi business in the euro zone. As of the first quarter of 2014, it harbours around Rmb79.4 billion in deposits, a 24% increase from the last quarter of 2013. It currently hosts the European headquarters of China's three leading banks, namely Bank of China, China Construction Bank and Industrial and Commercial Bank of China. China Merchants Bank and Agricultural Bank of China are expected to set up in Luxembourg as well.

    Luxembourg endeavours to play a more important role in the internationalisation of the renminbi. After the signing of the MOU, the Ministry of Finance of Luxembourg led a delegation of 70 top executives from the financial and related sectors to China to further reinforce the financial cooperation between China and Luxembourg. It was during this visit that announcements were made on the opening of branches of Alipay, China Merchants Bank and the Agricultural Bank of China in Luxembourg.

  2. China's State Administration of Foreign Exchange has relaxed foreign exchange control on round-trip investments utilising special purpose vehicles. How do the new rules facilitate trade and investment processes?

    On July 14 2014, the State Administration of Foreign Exchange (SAFE) promulgated the Circular on Issues Relevant to Exchange Control in Connection with Offshore Investment/ Financing and Round-trip Investment by Residents in China Through Special Purpose Vehicles (Circular 37) to simplify the approval process and promote cross-border investment, supporting China's outbound strategy.

    Circular 37 facilitates China's outbound investment processes in the following three ways:

    i. It expressly allows outward funds flow. Domestic residents may purchase and remit foreign exchange out of China to establish a special purpose vehicle (SPV), repurchase or delist shares of an SPV based on actual and reasonable needs. Domestic entities under direct or indirect control of a domestic resident may also finance their registered SPVs. These are very significant and positive developments...

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