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China will soon take additional measures to speed up steady yet effective growth in its fragile insurance sector, a key senior central government official said.
"Our major task is to take measures to make the insurance sector stronger and bigger so that it is compatible with China's overall economic growth," said Wu Dingfu, chairman of the China Insurance Regulatory Commission (CIRC), the top watchdog agency overseeing China's insurance industry.
As a key signal for such a move, China gave the green light earlier this year to a number of key domestic insurance firms, including China Life, the People's Insurance Company of China and Ping An Insurance, to prepare initial public offerings in overseas markets. And some of the firms are expected to issue shares in the Hong Kong stock market before the end of the year or early next year.
"The most thorny issue facing China's insurance sectors is that its growth is still not compatible with the growth of the country's overall economic and social development," said Wu.
He noted the central government will also strengthen its supervision over development of insurers' risk controls and repayment capabilities and will crack down on illegal practices to ensure a sound market climate for all market players. Procedures that formerly needed approval from the CIRC will be replaced by a market-orientated registration system, officials noted, just as the CIRC did over the past two years. Then, it rooted out 86 various items that previously required a go-ahead from CIRC.
"We must be fully aware that China's insurance sector is still in its infantile stage," Wu said, indicating that the limited size and scope, lack of management expertise, bad after-the-sale service, limited competitiveness and the degree of openness were all hindrances.
Wu made the remarks yesterday at the opening ceremony of the China Centre for Insurance and Social Security Research.
The centre, launched by the Insurance Department of Peking University, will target theoretical issues for better growth of China's insurance and social security sectors.
Despite China's insurance sector witnessing an annual 30 per cent growth rate in premiums in the past two decades, it still remains a trivial part of the country's overall financial portfolio, making up only 3 per cent of the country's total financial assets, much less than its rivals in the banking and securities sectors.
As of today, China is home to 59 insurance companies. The number of insurance brokerages has increased to 587, including insurance agents, insurance intermediary firms and rating companies. China's premiums this year stood at 305.3 billion yuan (US$36.87 billion), up 44.7 per cent over that from the previous year.
"But the premiums are only about 3.5 per cent of the amount of individual deposits in commercial banks, which stood at 8.7 trillion yuan (US$1.05 trillion) by the end of last year, much less than that of 7.4 per cent in global averages," Wu said, adding that this shows that China's insurance sector still has great growth potential.
(China Daily September 29, 2003)
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