Luxembourg is "very interested" in becoming an offshore yuan market and expects more Chinese funds will find overseas havens as use of the Chinese currency widens.

Marc Saluzzi, chairman of the Association of the Luxembourg Fund Industry, said in Shanghai yesterday: "The whole world is interested in investing in China, and if we can become an offshore yuan market like Hong Kong, the financial exchange between Luxembourg and China will be greatly boosted."

Three Chinese fund management companies have registered funds in Luxembourg, Saluzzi said. He expects the sector to grow quickly in the next five to 10 years.

The Bank of China and the Industrial and Commercial Bank of China have already established businesses in Luxembourg, offering yuanaccount operations.

Three banks from Shanghai, Chongqing and Beijing have also expressed interest in expanding to Luxembourg, according to Jeannot Krecke, the country's Minister of Economy and Foreign Trade.

A total of 700 billion yuan (US$110 billion) has accumulated in the offshore yuan market, mainly Hong Kong, while yuan-denominated bonds worth only 140 billion yuan have been issued.

Francois Guilloux, a researcher with Z-Ben Advisors, said there will be 1 trillion yuan in offshore markets by the end of the next quarter.

Only 15 fund management companies have established offices in Hong Kong, but Guilloux said more funds will go overseas, as "China will surely add more channels for yuan-backed investment."