Luxembourg has been granted an RMB 50 billion renminbi qualified foreign institutional investor (RQFII) quota by the People’s Bank of China, meaning that Luxembourg investors can now invest directly in the Chinese capital market.
The RQFII scheme allows offshore RMB to be reinvested in the Mainland China securities market, and could be beneficial to those fund managers using Luxembourg as a platform for cross-border distribution.
International and Chinese fund promoters have already set up RQFII funds through Luxembourg-domiciled vehicles, using other jurisdictions’ quotas. This development means that Luxembourg’s European and global investor base have the opportunity to use the scheme directly, up to a limit of RMB 50 billion.
Luxembourg already has the highest number of RMB deposits in Europe, with RMB 61.5 billion. It also holds the largest value of loans and investment funds, with RBM 61.1 billion and RMB 296.3 billion, respectively.
The quota comes after the Industrial and Commercial Bank of China in Luxembourg was designated an RMB clearing bank in December last year.
Pierre Gramegna, Luxembourg’s minister of finance, said: “The granting of the RQFII quota again demonstrates China’s recognition of the Luxembourg financial centre as one of Europe’s main hubs for international renminbi business.”
“We are proud to play such a significant role in the process of the internationalisation of the renminbi.”
Luxembourg is the second largest investment fund centre in the world, after the US, with more than 67 percent of UCITS funds distributed internationally based in the jurisdiction.
