China Thursday lifted the lid on its commitments to the World Trade
Organization (WTO) for the first time by releasing procedure
details for foreigners entering the insurance market.
Industry watchdog
China Insurance Regulatory Commission (CIRC) set out the
process in anticipation of a flood of interest from overseas
firms.
"China's insurance industry will follow WTO rules and the
commitments for foreign insurers involve forms of establishment,
geographic coverage, business scope and licenses,'' announced Meng
Zhaoyi, deputy director of CIRC's International Department.
Meng was speaking at the two-day WTO Insurance Summit held in
Beijing, which finished Friday.
Details include:
--
For the establishment of models following China's entry to the WTO,
foreign non-life insurers may set up their branches or joint
ventures in China, and a joint venture with foreign equity could be
51 percent.
Within two years of China's accession, wholly foreign-owned
subsidiaries of life insurers will be permitted with no limitation
on business models.
Foreign life insurers can set up joint ventures in China but
foreign equity should be no more than 50 percent.
Within five years of accession, wholly foreign-owned subsidiaries
for life insurers could be set up.
--
Concerning geographic coverage, foreign life and non-life insurers
will be permitted to provide services in Shanghai, Guangzhou,
Dalian, Shenzhen and Foshan on China's accession.
Within two years, such companies' business could be expanded to
another 10 cities.
And the geographic restriction for these foreign companies will be
lifted within three years of China becoming a member of WTO.
--
For business scope, foreign non-life insurers will be permitted to
provide identified services in specified areas on China's entry to
the WTO, and business limitation will be abolished within two
years.
Within two years of accession, foreign life insurers may only
provide individual insurance to foreigners and Chinese.
Within three years of accession, they will be permitted to provide
health insurance, group insurance and pension/annuities insurance
to foreigners and Chinese.
--
For license approval, business licenses will be issued to foreign
insurers with no quantitative limits upon China's entry to the
WTO.
Qualifications for establishing a foreign insurance company are as
follows: the investor shall be a foreign insurance company whose
nation has more than 30 years' experience as a WTO member.
It
shall have a representative office for two consecutive years in
China.
And it shall have total assets of more than US$5 billion at the end
of the year prior to application.
Official statistics show China's insurance sector has registered 10
to 15 percent revenue growth for several consecutive years. Total
income from premiums hit US$19.27 billion last year and is likely
to exceed US$20 billion this year.
But despite its rapid growth, the insurance industry is still only
a small part of the entire economy -- less than 2 percent --
compared with 11 percent in Japan and 8 percent in the United
States.
Foreign insurers shared just 1 percent of the Chinese insurance
market.
"WTO accession provides lots of business opportunities for domestic
and foreign counterparts, and the key task for competitors is
exploring and expanding the market with huge potential,'' said Long
Yongtu, vice-minister with the foreign trade and economic
cooperation.
"Everybody should firstly consider how to make the market cake
larger instead of how to divide the shares,'' he added.
(China
Daily November 23, 2001)