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 finishes 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)
