Luxembourg opens doors to Chinese investors

Luxembourg, the second-largest financial hub of the European Union, welcomes Chinese investors and expects China to open its markets further and carry out more economic reforms, its finance minister says.

"We're looking forward to seeing how the financial market is going to open up more in China in the near future, and very eager to hear what decisions are going to be announced after the 19th National Congress of the Communist Party of China," Pierre Gramegna says in an exclusive interview.

"Europe and China are really today on the same line as they together promote bilateral trade and investment, which will strengthen the relationship between the two sides," he says.

With the UK leaving the European Union, Luxembourg, which holds second place after London as a financial center in Europe, is attracting more Chinese financial institutions to conduct their business and establish branches or subsidiaries in the country.

"We should not overdramatize the impact of Brexit, (but) many Chinese banks have also found solutions in Luxembourg (that they see) as another entrance to the EU Single Market," Gramegna says.

Seven Chinese banks have opened subsidiaries or branches in Luxembourg. They include Bank of China, Industrial and Commercial Bank of China and China Construction Bank.

"Luxembourg now has 50 billion yuan ($7.5 billion; 6.4 billion euros; ￡5.6 billion) of RMB Qualified Foreign Institutional Investors," Gramegna says. "This will continue to promote the renminbi's internationalization by increasing its usage in trade and investment in Luxembourg."

So far, Luxembourg has been the second-largest global destination for investment funds investing in China. About 65 percent of all European investment funds that invest in the Chinese mainland are based in Luxembourg, according to data from Luxembourg for Finance, a public-private partnership between the Luxembourg government and the Luxembourg Financial Industry Federation.

The Commission de Surveillance du Secteur Financier, the country's financial service regulator, has also paved the way for European funds to access the Chinese interbank bond market and the A-share market.

The financial sector is regarded as the first pillar of Luxembourg's economy. Funds based in the country invested 1.42 trillion euros ($1.7 trillion) in euro-area corporations and governments in 2016, with a further 358 billion euros invested in other EU member states, according to the United Nations Conference on Trade and Development.

"Luxembourg has many established frameworks for financial activities," says Paul Junck, managing director of the Luxembourg Private Equity and Venture Capital Association.

"With regulators becoming more professional, government more proactive, and given Brexit, the country is playing an increasingly vital role as a financial center in Europe and in the world."

As key to the development of both Luxembourg and China, investors from both sides have been keen to find the right opportunities in each other's market, and regulators on both sides are supposed to increase the ceiling for investors to foster open trade, Junck says.

"In Luxembourg, there are billions of dollars committed to the financial sector yet waiting to be invested," he says. "China has already laid a solid foundation for operating financial businesses, and Luxembourg can offer advice to investors about the complexities in European markets."

Contact the writers at chenjia@chinadaily.com.cn

(China Daily European Weekly 10/06/2017 page29)