Luxembourg funds get direct RMB access to China

China moneyLuxembourg’s European and global investor base can now use the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme to invest directly into Chinese capital markets.

The People’s Bank of China has granted the country a 50 billion renminbi (€7.5 billion) RQFII quota.

Luxembourg, a major centre of Ucits fund processing with 67% of cross-border Ucits based there, now has another string to its bow in cementing its position as the second largest investment centre after the US.

The RQFII scheme is useful for fund managers who use Luxembourg as a platform for cross-border distribution. Major international and Chinese fund promoters had already set up RQFII funds through Luxembourg-domiciled vehicles and using other jurisdictions' quotas. The jurisdiction is setting itself up as a hub for renminbi-denominated investment funds, loans and deposits. There are 296.3 billion renminbi in funds, for example.

The RQFII scheme was launched in Hong Kong in 2011 and has been expanding to other jurisdictions since 2013, enabling offshore renminbi to be reinvested into the Chinese mainland securities market.

Luxembourg’s minister of finance, Pierre Gramegna, says: “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.”

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