* China Construction Bank opens European HQ in Luxembourg
* Third large Chinese bank to do so
* Luxembourg: European leader in yuan bonds, funds, loans
* Confident will get Chinese investment allocation, like
LUXEMBOURG, Oct 29 Luxembourg hailed the opening
on Tuesday of the European headquarters of a third Chinese bank,
underlining its ambition to corner a larger share of Europe's
offshore yuan business.
China Construction Bank joins global top 10
peers Bank of China and ICBC in
establishing a continental base in the tiny Grand Duchy -
Europe's largest investment fund centre and a leading private
The opening comes two weeks after China gave British-based
investors the right to buy up to 80 billion yuan ($13.15
billion) of stocks, bonds and money market instruments in China,
putting London ahead in the race to become the main offshore hub
for trading in China's currency and bonds.
Luxembourg-based investors cannot directly invest in China,
but the country, covering an area a third less than the smallest
U.S. state Rhode Island, has dealt with China for decades and
has seen yuan business shoot up in recent years.
Luxembourg is behind only Hong Kong in renminbi "dim sum"
bonds, with 24.5 billion yuan from the likes of Caterpillar
and Volkswagen listed on its stock exchange.
It also home to a further 214 billion yuan of assets under
management, according to Luxembourg's central bank.
"We are not like London yet, we don't have a quota," said
Nicolas Mackel, chief executive of sector development agency
Luxembourg for Finance. "But if you look at assets under
management we are in a different league."
Offshore renminbi loans in Luxembourg total some 62 billion
yuan, according to PwC, the highest level in Europe, and
deposits 40 billion yuan, the largest pool in the euro zone.
Mackel expressed confidence that China would shortly agree a
quota of investment for Luxembourg-domiciled investors.
"I'm confident it will happen before the New Year and I hope
that's more the western (New Year) than the Chinese, although
they are only a month apart."
"This is a very Chinese way of gradually opening up. It does
not mean that London for the next five years will have an
exclusive deal. The pace of change is accelerating."
The offshore yuan business might not be as fierce a battle
as some observers believe, with a market growing so rapidly that
there will be ample to share around.
Luxembourg for Finance says overall offshore renminbi
deposits are forecast to grow to above 8 trillion yuan in 2015,
a 10-fold increase from now, driven by a rise in trade
settlement in the currency.
"For the Chinese, the strategic object is the
internationalisation of the renminbi, the objective to make it
used as widely as possible," Mackel said. "They want to make
renminbi a reserve currency ultimately," said Mackel.
The head of yuan trading settlement at a European bank said
that the internationalisation of the Chinese currency beyond
Hong Kong was designed not to have cities competing, but to
ensure companies were comfortable trading in yuan.
About 18 percent of China's global trade is denominated in
yuan, compared with less than 1 percent nearly four years ago
when Beijing first started experiments in yuan
Andrew Main, managing partner at London-based fund
management firm Stratton Street Capital, said Hong Kong itself
should also benefit from the rise of financial rivals.
"The pie gets bigger and that would open tremendous interest
for the Chinese currency," he said. "Every city whether it is
London or Luxembourg has its unique strengths and that will
promote the internationalisation of the currency."