Tax haven sees 86pc rise in yuan flows

PUBLISHED : Wednesday, 28 August, 2013, 12:00am
UPDATED : Wednesday, 28 August, 2013, 4:17am

Luxembourg has become the second-largest country to settle yuan payments in Europe after France, with more and more yuan capital flowing to the tax haven as Chinese firms rush to set up headquarters there.

The country has seen an 86 per cent jump in yuan fund transfers during the year ended July, mainly due to increasing financial transfers, according to information network Swift.

More than 58 per cent of the fund transfers between Luxembourg and China or Hong Kong was denominated in yuan last month, compared with 42 per cent a year earlier, it said.

"Luxembourg's No 2 ranking in the euro zone for RMB payments is not surprising, with close to 40 RMB-denominated bonds listed on the Luxembourg Stock Exchange and a strong presence of Chinese banks," said Patrick de Courcy, deputy chief executive and head of markets and initiatives, Asia Pacific, at Swift.

Major global financial centres, including London, Taipei and Singapore, are striving to become yuan hubs as Beijing moves towards full convertibility. Luxembourg has been getting a lot of yuan traffic because of its superior tax and legal systems.

"Once a Chinese financial institution such as a bank has headquarters in Luxembourg, branching out in other EU nations will need no or limited approvals, giving them access to the whole European market from Luxembourg, including for their RMB activities," said Stephane Karolczuk, head of law firm Arendt & Medernach's Hong Kong office.

"Luxembourg is not where the money is usually invested, but rather a gateway to Europe for companies in the mainland and Hong Kong," Karolczuk said.

Industrial and Commercial Bank of China and Bank of China operate a network covering major European cities from their headquarters in Luxembourg. China Construction Bank said in July it would open an office in the nation.

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