The central banks of Luxembourg and China have inked a preliminary currency clearing deal. The Banque centrale du Luxembourg and People’s Bank of China signed the memorandum of understanding on Sunday, paving the way for direct trading of China’s renminbi (RMB) currency and the euro in the Grand Duchy.

China’s central bank also signed a similar accord with Paris on Sunday, and in April with authorities in Germany and the UK. Direct trading between the RMB and British pound launched earlier this month, the PBC said.

“The MoU aims to establish a cooperation between the two institutions in terms of oversight, exchange of information and assessment pertaining to the renminbi business in Luxembourg in view of a forthcoming designation, by the PBoC, of a renminbi clearing bank in Luxembourg,” the BCL said in a press statement.

“The BCL will monitor the renminbi market in Luxembourg and share relevant data with the PBoC,” the Grand Duchy’s central bank said on Sunday.

“A RMB clearing bank in Luxembourg will be designated by the People’s Bank of China” at an unspecified date, the Chinese central bank said in a separate statement on Sunday.

“The establishment of RMB clearing arrangements in Luxembourg will promote the use of RMB in cross-border transactions by enterprises and financial institutions in China and Luxembourg, and further facilitate bilateral trade and investment,” the PBC said.

Currently foreign exchange is tightly controlled by Beijing, but the Chinese government is the midst of a multi-year plan to make the RMB more fully convertible in world markets and eventually became a global reserve currency on par with the dollar, euro, pound and yen.

Luxembourg is competing with London, Paris and Frankfurt to become the leading offshore RMB trading hub in Europe. The Grand Duchy is already one of the largest EU financial centres handling RMB-denominated bank loans, investment funds and bond issuance and trading.