Luxembourg has been granted 50 billion yuan ($8.07 billion) of RQFII (RMB Qualified Foreign Institutional Investor) quota on Wednesday, marking a milestone in the city's ambition to become a leading European offshore renminbi hub.

RQFII quota allows approved foreign institutional investors to access China's onshore investment opportunities, including China's fixed-income markets and stock markets, which would be otherwise unavailable to foreign investors due to China's capital market controls.

China launched the RQFII program in 2011 as part of an effort to open up the country's capital accounts and promote the renminbi's internationalization. Starting as a pilot program in Hong Kong with 20 billion yuan, China's RQFII quota was expanded to 270 billion yuan by the end of 2012.

The RQFII program was extended to London in 2013, when British Chancellor of the Exchequer George Osborne visited China for the UK-China Economic and Financial Dialogue. China's RQFII quota to London's investors is currently 80 billion yuan.

Luxembourg Minister of Finance Pierre Gramegna said that the RQFII quota granted to Luxembourg demonstrates China's recognition of Luxembourg 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," Gramegna said.

Since the beginning of China's efforts to open up its capital market controls through the internaitonalztion of renminbi, many European centers have been keen to develop offshore renminbi activities within their jurisdictions.

Luxembourg has participated in this race with great effort, especially leveraging on its expertise in fund management, and in recent years many Luxembouorg domiciled funds have been increasingly investing in China opportunities.

A number of these funds are RQFII funds that currently leverage on other jurisdictions' RQFII quotas, but with the granting of RQFII to Luxembourg it is expected that Luxembourg's European and global investor base will be able to make such investment more directly.

In September 2014, ICBC Luxembourg Branch has been appointed as a renminbi clearing bank in Luxembourg, which was seen as a major step to build Luxembourg's offshore renminbi liquidity and market confidence.

An official clearing bank facilitates the efficient clearing of offshore renminbi transactions, achieved through the appointed bank's direct cooperation with the People's Bank of China, China's central bank.