China to let insurers invest more abroad: Official

Beijing, May 31: China will soon let insurance firms plough more money into equities and other assets overseas, including London and New York, and allow them to set up fund companies, a senior regulatory official said on Thursday.

Sun Jianyong, a director of the China Insurance Regulatory Commission, told reporters that his commission would soon issue long-awaited rules to permit domestic insurers to invest 15 percent of their total assets abroad, up from 5 percent now.

Given that Chinese insurers assets totalled 1.97 trillion yuan (7.5 billion) at the end of 2006, the move could potentially release up to 300 billion yuan into overseas markets. ''We are going to lower all the basic regulatory thresholds so they can invest abroad,'' said Sun, who is in charge of the department dealing with how insurers invest their money.

Sun said that, separately, detailed rules governing how insurers can invest abroad under the Qualified Domestic Institutional Investor (QDII) scheme would be issued in the next one or two months.

China gave the nod for its insurers, banks and fund companies to invest abroad through the QDII programme last April, as part of Beijing's efforts to encourage more capital outflows to slow the accumulation of foreign currency reserves.

It was not clear whether assets invested abroad under the QDII scheme, which is subject to quotas issued by the currency regulator, would come under the proposed 15 percent threshold.

Under QDII, insurers will be permitted to convert clients' yuan premiums into foreign exchange and invest them abroad.

Their current overseas assets, invested mainly in fixed-income products, money market instruments and Chinese stocks, were largely raised by initial share offerings overseas or pre-IPO placements to foreign strategic investors, according to a Deutsche Bank report.

Sun said insurance firms would be given the green light in future to invest in foreign stocks, derivatives and mutual funds.

Under regulations issued in 2004 and 2005, insurers that are qualified to invest abroad must do so mainly in fixed-income and money-market products in Hong Kong.

He also said there would be concrete progress this year towards letting insurers set up fund companies. He declined to disclose more details.

Beijing has been relaxing restrictions on insurers as part of its efforts to modernise the financial industry. It has allowed insurance firms to buy equity stakes in banks and to finance long-term infrastructure projects.

Reuters>