Switzerland, Luxembourg Vie For RMB Crown

www.bethelfinance.com

Competition for Renminbi business is heating up between Switzerland and Luxembourg with both territories reporting details of their success in the area to date.

A recent statement from Luxembourg's Minister for Finance Luc Frieden concerning Luxembourg's ambition to position itself as the leading international Renminbi center in the Euro area comes on the heels of a report from the Swiss Bankers Association discussing Switzerland's appeal for Renminbi-denominated wealth and asset management business.

Frieden is confident that Luxembourg has firmly established itself as the market leader. He pointed out that Luxembourg is home to RMB40bn (USD6.5bn) in deposits; RMB62bn in loans provided by Luxembourg banks; and about 39 RMB-denominated bonds are listed on the Luxembourg Stock Exchange with a combined value of RMB24bn. "The figures speak for themselves and confirm that Luxembourg is already today de facto the leading international RMB center in the euro area," he said.

He continued: "Luxembourg is known for its advanced economic, legal and regulatory system, as well as its very efficient financial system paired with an international dimension. Naturally the internationalization of the Renminbi has impacted our financial center, given the fact that the financial services provided in Luxembourg are by essence international and serve a market that largely transcends the domestic one."

"The first Renminbi-denominated bond outside of Greater China was listed at the Luxembourg Stock Exchange in September 2011. Our banks and our financial institutions have already gained valuable experience in this area and so we did not only discover the Renminbi today." He highlighted also the valuable presence of ICBC, Bank of China and the China Construction Bank who have established European headquarters in Luxembourg.

"Our ambition is to firmly establish Luxembourg as the first and most important international Renminbi centre in the Euro Area, and the Luxembourg government will continue to lend its strong support, via the Luxembourg platform, to turn the Renminbi business into a common success from a European as well as Chinese perspective."

Switzerland, too, is vying for a significant share of the market. A recent report released by the nation's bankers association lays out Switzerland's efforts to welcome Chinese currency flows, and discusses Switzerland's conducive environment for wealth and investment.

It underscores the importance of the Renminbi for offshore financial centers with China expected to account for more than one third of world's economic output by 2016, according to IMF estimates.

The Bankers Association pointed out that "as a global payment currency, the Renminbi has moved from position 35 in October 2010 to number 13 in only two years. Some 12 percent of China’s external trade is currently settled in Renminbi, an almost six-fold increase in three years. Today, more than 10,000 financial institutions conduct business in Renminbi, up from 900 two years ago. By 2015 Chinese companies expect one-third of Chinese external trade to be Renminbi-denominated."

According to the association, thousands of banking clients already hold accounts in Renminbi, with assets in custody or under management exceeding RMB10bn.

It anticipates that the Swiss financial center will receive a considerable boost when the comprehensive free trade agreement with China takes effect. "Switzerland was the first country in Europe (with the exception of Iceland) to conclude such an agreement with China," it pointed out.

The Swiss Government outlined in December 2012 a blueprint for establishing Switzerland as a hub for Renminbi businesses. Looking ahead, the report notes that efforts are under-way which might eventually lead to the establishment of a RMB-CHF swap line between the People‘s Bank of China and the Swiss National Bank. This would greatly facilitate Renminbi clearing by a bank located in Switzerland, lowering transaction costs and highlighting Switzerland’s position as a European hub for China and Renminbi business, the Association believes.