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China's first private insurance company is likely to be launched soon, a move that will end monopoly of State funds in the sector.
The much-anticipated company, the China Minsheng Insurance Co, will be mainly funded by investments from a number of private tycoons, and its management team will also come from private companies. Yan Keqiang, vice-chairman of the All China Federation of Industry and Commerce, an organization representing private enterprises, is likely to become chairman of the new insurance company.
Private investors include Sichuan-based Orient Hope Group New Hope Group, Zhejiang-based Wanxiang Group, Jiangxi-based Huiren Group and Shandong-based Fanhai Group.
"We are striving to become the largest shareholder in new company," said Lu Guanqiu, president of the Xiaoshan-based auto parts maker Wanxiang Group in East China's Zhejiang Province, which has injected a total of 120 million yuan (US$14.49 million) into the insurance company, in an earlier interview with Business Weekly.
But another party that could challenge Wanxiang's position is the Orient Hope Group and the New Hope Group, two giant private enterprises that have made an aggressive investment of 135 million yuan (US$ 16.30 million) in the new company.
The 20-investor company has also lured funds from a number of giant State-owned companies, including the China Nonferrous Metal Corp, Beijing Telecom and the China Huacheng Group.
The new company, with a total investment of 1 billion yuan (US$120 million), could not independently get the green light to carry out business, but will first need to find foreign partners and form a joint venture operation to develop life insurance business in the country.
China approved the launch of four life insurers last year, a strategic step designed to boost the number of competitors in the market. All of them, however, must find foreign partners to establish joint venture life companies.
"As of today, the preparatory team of Minsheng Insurance is in talks with a number of foreign insurance giant companies, including those from Britain, Switzerland and the United States," Tang Yong, director of the Investment Department under the Orient Hope Group, was quoted by a local newspaper as saying.
Tang said the company is now seeking possible marriages and talking with Travellers Group, the insurance arm of Citicorp, which is the largest financial conglomerate in the world and has a 100-year history of doing business in China.
Tang and Travelers Group were not available for comments.
China currently hosts 15 life insurers, 10 of which are Sino-foreign joint venture insurers. Most of them are located in Shanghai, the financial hub of the country.
Prior to the approval of overseas insurers, China's insurance sector was considered a special area reserved for State-funds, and access by private investment was not allowed.
Today, foreign-funded insurance companies, taking some 5 percent of the total market, are eyeing a jump to 10 percent in five years.
More foreign companies are expected to dive into China's insurance market, leading to enormous growth potential following China's accession into the World Trade Organization (WTO).
"The inflow of private funds to the market will greatly reignite the market, and it will lead to better corporate governance in the new company," said Wang Xujin, dean of the Insurance Department at Beijing University of Industry and Commerce.
Wang predicted that an increasing number of private investors who are upbeat about prospects for the financial sector will come to China as the country further opens its markets in the years to come.
(China Daily April 20, 2002 )
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