The China Insurance Regulatory Commission (CIRC), the country's
industry watchdog, yesterday released a detailed pilot regulation
to manage the overseas investments of insurance companies' foreign
assets.
"With a wide coverage and detailed rules, the pilot regulation
is a compass for insurance companies to venture abroad," Long
Xiangxin, manager of the capital management center of New Life
China Insurance Co., told China Daily.
With 30 percent annual growth in the past two decades, China's
insurance industry has gained good momentum, as has the insurance
foreign exchange and assets business.
Moreover, with the listing of China
Life Insurance Co., PICC Property and
Casualty Co. and Ping An
Insurance Co. foreign assets from the insurance sector have
topped US$10 billion, mainly coming from the capitalization of
joint ventures, foreign-funded insurance companies and capital
raised by the three listed insurance companies.
"The regulation clarifies the expanded investment channel and
tools, a big help for insurers," Wang Guojun, an insurance
professor at the University of International Business and Economics
(UIBE), said.
According to the regulation, insurance companies can invest
their foreign exchanges in overseas stock markets, structural
deposits, mortgage securities and monetary funds.
However, the overseas stock investment is only confined to
Chinese insurers listed in New York, London, Frankfurt, Tokyo,
Singapore and Hong Kong.
In which case, H-shares, especially red chips, will be the
primary choice for investment, insiders say.
H-shares are HK dollar-denomination shares of Chinese mainland
companies listed on the Hong Kong Stock Exchange, and red chips are
companies with controlling Chinese mainland shareholders
incorporated and listed in Hong Kong.
"The comparatively low valuation of H-shares also makes them
safer," Wang says
According to Zeng Yujin, an official at the CIRC, overseas
investments also have no influence on the domestic stock
market,
"Because the yuan cannot be exchanged into foreign currencies
under a capital account, there shouldn't be any concern that
capital will be withdrawn from the domestic stock market," Zeng
added. "The only influence would be psychological."
The regulation also sets an investment cap to control potential
risks.
The total amount of foreign exchange that can be invested in
overseas stock markets should be under 10 percent of the investment
quota set by the State Administration of Foreign Exchange.
Investment in a single stock is to be no more than 5 percent of the
total release of that stock.
Meanwhile, the CIRC encourages insurers to invest in developed
countries and regions. It has expanded the list of tradable
currencies to include the US dollar, the euro, the yen, the pound,
the Canadian dollar, the Australian dollar, the Singapore dollar,
the Hong Kong dollar and any other currency it might approve from
time to time. The list of currencies is essentially the same as
that of the basket of currencies that the yuan is weighted
against.
(China Daily September 12, 2005)