Bank of China: why we chose Luxembourg
Bank of China, one of the largest banks in the world by market capitalisation value, was the first of seven chinese banks to have chosen Luxembourg as its EU regional hub. These banks serve “going global” chinese clients and “going global” european clients in their overseas investment. we sat down with Lihong Zhou, Chairman (Bank of China (Luxembourg) S.A.) / General Manager (Bank of China Luxembourg branch), to find out more about the company’s history, activities and long–term strategy.
For how long has Bank of China been based in Luxembourg and what is the role of the bank within the financial centre?
As the first Chinese bank to establish a branch outside China after the founding of the People’s Republic of China, we are indeed very proud to say that Bank of China Luxembourg is turning 40 this year. Through four decades of the Bank’s growth and integration, the role it assumes today is not only as the European Regional Hub of a publicly-listed G-SIB, ready to expand footprints across Europe but also as a bridge connecting Sino-European businesses and investments while promoting Luxembourg internationally, e.g. our active role in the SME match-making event during the 2017 China-EU summit in Brussels and in the match-making event at the China International Import Expo in 2018.
What are your primary activities and how have you developed them?
Our current activities range from personal and corporate banking to financial market business, asset management, and custody services. We provide a wide range of services to our corporate clients, including M&A financing and advisory services, commercial real estate finance, structured finance, global project finance, leasing finance, ECA finance, aircraft and shipping finance, trade and commodity finance, as well as reinforcing our transaction banking business.
Besides offering a complete range of FICC (Fixed income, currency, commodity) products and services, as well as asset management services (structured deposits and investment funds), we deliver efficient tailor-made DCM financing solutions to different clients, in various currencies, across onshore/o‑shore markets, through conventional and innovative methods (such as panda bond, green financing). We also offer international investors diversified investment tools, spanning from assets to structured products and investment funds (UCITS, AIF).
How do you see your activities developing?
Our business activities have substantially evolved from our past traditional model in commercial banking mainly of deposits, loans, and trade finance, to one with a much more comprehensive range of products and services. Stemming from our present activities as the Group’s regional hub in Europe, we will likely continue in the path towards providing more effective solutions to our customers through innovation and transformation, while tapping on new markets and exploring new business opportunities.
What is Bank of China’s role in green finance?
Bank of China actively promotes green finance. In Luxembourg – which ranks among the top green financial centres in the world, we have issued green bonds listed here, including our milestone “Bank of China o‑shore green bond” that was issued in 2016. Over the past years, we have also given financial support to a series of green projects, helping our clients to expand their green business.
It is worth mentioning here that a few months ago, Bank of China signed a tri-party MoU with Luxembourg Stock Exchange and Shanghai Stock Exchange to jointly promote the “green bond channel”.
Why is Luxembourg the perfect fit for Chinese business in Europe?
Luxembourg’s robust financial ecosystem, stability, multiple cross-border business, multi-lingual workforce, leading role in green bonds, and ever-growing Renminbi business make it an attractive country for Chinese business, as well as the perfect gateway into Europe’s financial markets, with 40% of all FDIs into the Continent funnelling through the Grand Duchy as a base for strategic acquisitions.
How are relations between China and Luxembourg and how is this of benefit to the Bank of China?
The Sino-Luxembourg relations have always been excellent, with strong confidence and economic bond between the two countries. This is of undoubted importance to a Chinese bank such as our bank that has been operating in Luxembourg and serving as a bridge for so many years. Closer ties open up more doors for greater business cooperation, more investments going both ways and more profound understanding from the intercultural exchanges, all of which spell positive benefits not just to Bank of China Luxembourg, but also to many others from both countries, whether they are business entities or private individuals, myself included.
How important is it to you that business can be conducted in English, but that as a non-EU bank you can also find a collaborator that can speak the languages used in the other member states of the EU?
One of the many attractive factors about Luxembourg is that besides the official languages (Luxembourgish, French and German), English is widely used as well. It is undoubtedly beneficial that we can conduct our business, and communicate with the local authorities, in English.
I also think that beyond the choice of language, what counts most is the culture of effective communication and mutual understanding, whether it is with external parties, with our clients, or internally with colleagues. This is of particular importance, considering that we have a total of 23 different nationalities among our employees in the Luxembourg office alone, and can easily find a collaborator who speaks another European language to cater to different needs.
What are the business benefits of being located here?
Luxembourg has a strong foundation as an international financial centre, with the largest Eurobonds issuing platform in the Eurozone and the biggest pool of RMB deposits and funds, and is an attractive and ideal place for businesses. Adding to that are factors such as Luxembourg’s history of political and social stability, effective legal and regulatory frameworks, efficient financial ecosystem, openness of the entire country, friendliness towards foreigners, and also easy business travelling under the Schengen Treaty.
How does the local ecosystem support your business?
Undeniably, one of the competitive advantages of Luxembourg is its well-developed financial ecosystem that benefits existing market players and attracts new entrants. Over the past years, we have already seen an increasing number of Chinese banks and companies coming to establish here, and to expand the business to other parts of Europe. Luxembourg’s vibrant ecosystem of service providers and experts offers helpful support to these Chinese entities in their local and cross-border business development, our Bank included. We truly appreciate the easy accessibility and high professionalism of our service providers, including consultants and advisors, auditors, third-party management companies, etc.
And looking ahead to the future, how do you plan to develop further?
Our Bank’s primary aims are to provide more in-depth, value-added and comprehensive services to our clients, commit to our social responsibilities, continually maintain a steady pace of our business development, and also to give support to the real economy.
One of the plans we have for this year is to reinforce our Bank’s transaction banking business and to offer a more comprehensive range of treasury services to our clients.
What do you appreciate most about living and working in Luxembourg?
Luxembourg is a small, beautiful and a highly efficient country in the centre of the EU, with excellent working conditions and stability. What I value most is the tranquillity with its picturesque nature, and I very much enjoy the quality of life here.
LEO Mag March 2019, Luxembourg for Finance, Gilly Mathieson.
Photo : Mike Zenari