Opening of China Construction Bank's European headquarters spurs Luxembourg's yuan hub hopes

Luxembourg hailed the opening on Tuesday of the European headquarters of a third Chinese bank, underlining the tiny country’s ambition to corner a larger share of Europe’s offshore yuan business.

China Construction Bank joins global top 10 peers Bank of China and ICBC in establishing a continental base in the grand duchy – Europe’s largest centre for investment funds and a leading hub for private banking.

The opening comes two weeks after Beijing gave investors based in Britain the right to buy up to 80 billion yuan (HK$101 billion) of stocks, bonds and money market instruments in China, putting London ahead in the race to become the main offshore hub, besides Hong Kong, for trading in China’s currency and bonds.

Luxembourg-based investors cannot directly invest in China, but the country, covering an area of 2,586 square kilometres, has dealt with China for decades, and its yuan business has shot up in recent years.

The grand duchy is behind only Hong Kong in yuan-denominated “dim sum” bonds, with 24.5 billion yuan from the likes of Caterpillar and Volkswagen listed on its stock exchange.

Luxembourg is also home to a further 214 billion yuan of assets under management, according to its central bank.