Luxembourg hailed the opening on Tuesday of the European headquarters of a third Chinese bank, underlining its 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 tiny Grand Duchy - Europe's largest investment fund center and a leading private banking hub.
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The opening comes two weeks after China gave British-based investors the right to buy up to 80 billion yuan ($13.15 billion) of stocks, bonds and money market instruments in China, putting London ahead in the race to become the main offshore hub for trading in China's currency and bonds.
Luxembourg-based investors cannot directly invest in China, but the country, covering an area a third less than the smallest U.S. state Rhode Island, has dealt with China for decades and has seen yuan business shoot up in recent years.
Luxembourg is behind only Hong Kong in renminbi "dim sum" bonds, with 24.5 billion yuan from the likes of Caterpillar and Volkswagen listed on its stock exchange.
It also home to a further 214 billion yuan of assets under management, according to Luxembourg's central bank.
"We are not like London yet, we don't have a quota," said Nicolas Mackel, chief executive of sector development agency Luxembourg for Finance. "But if you look at assets under management we are in a different league."
Offshore renminbi loans in Luxembourg total some 62 billion yuan, according to PwC, the highest level in Europe, and deposits 40 billion yuan, the largest pool in the euro zone.
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Mackel expressed confidence that China would shortly agree a quota of investment for Luxembourg-domiciled investors.
"I'm confident it will happen before the New Year and I hope that's more the western (New Year) than the Chinese, although they are only a month apart."
"This is a very Chinese way of gradually opening up. It does not mean that London for the next five years will have an exclusive deal. The pace of change is accelerating."
Win-win
The offshore yuan business might not be as fierce a battle as some observers believe, with a market growing so rapidly that there will be ample to share around.
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Luxembourg for Finance says overall offshore renminbi deposits are forecast to grow to above 8 trillion yuan in 2015, a 10-fold increase from now, driven by a rise in trade settlement in the currency.
"For the Chinese, the strategic object is the internationalization of the renminbi, the objective to make it used as widely as possible," Mackel said. "They want to make renminbi a reserve currency ultimately," said Mackel.
The head of yuan trading settlement at a European bank said that the internationalization of the Chinese currency beyond Hong Kong was designed not to have cities competing, but to ensure companies were comfortable trading in yuan.
About 18 percent of China's global trade is denominated in yuan, compared with less than 1 percent nearly four years ago when Beijing first started experiments in yuan internationalization.
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Andrew Main, managing partner at London-based fund management firm Stratton Street Capital, said Hong Kong itself should also benefit from the rise of financial rivals.
"The pie gets bigger and that would open tremendous interest for the Chinese currency," he said. "Every city whether it is London or Luxembourg has its unique strengths and that will promote the internationalization of the currency."