Guidelines for insurance companies investing in the banking
sector have been issued by the China Insurance Regulatory
Commission (CIRC), which is the industry's
watchdog.??
A circular published on Monday authorizes the country's
insurance firms and institutions to buy shares in China's unlisted
commercial banks.
The opening of bank shares to these firms would assist in better
distributing insurance funds and improving investment earnings,
said a commission source who requested anonymity.?
According to the circular China's insurers may invest up to 3
percent of their total assets in unlisted commercial banks.
Insurance company investments in the banking sector have been
divided into two categories: general investments where less than 5
percent of a bank's shares are held and major stakes of more than 5
percent.?
It emphasized that insurance firms that plan to make major
investments shouldn't buy shares in more than two commercial banks.
The total assets of China's insurance industry reached 1.7 trillion
yuan (US$215.1 billion) at the end of June.
The government has expanded investment options by encouraging
insurers to directly or indirectly invest in capital markets,
securities products, real estate and venture capital and to
purchase shares in commercial banks.
CIRC figures show that Chinese insurers are major investors in
the country's stock market and hold as much as 49.9 billion yuan
(US$6.3 billion) in stocks. These are mainly in commercial
banks.
Wu Dingfu, CIRC chairman, said recently his body supports
insurers investing in bank shares. "The CIRC is also ready to
receive applications from banks to set up insurance firms," he
said.
The financial regulations that took effect in China in 1995
originally banned banks from engaging in the insurance business and
vice versa.
Under its agreement with the WTO it's expected that China will
fully open its financial markets to foreign competitors by the end
of 2006.
(Xinhua News Agency October 18, 2006)