BEIJING - Chinese
insurance companies will soon be allowed to invest
as much as 300 billion yuan (US$39 billion) in
equities in overseas markets, said a senior
official of the China Insurance Regulatory
Commission (CIRC).
The move is part of the
government's efforts to "deregulate the sector
step by step", said Sun Jianyong, director of the
insurance fund management regulatory department of
the CIRC, at a derivatives forum in Beijing on
Thursday.
The regulator will initially
allow insurers to invest in mature stock
markets such as London and
New York this year.
"The long-awaited new
rules on insurers' overseas investments will be
issued in one to two months," said Sun.
The CIRC published the draft rules,
designed to broaden insurers' investment channels
and help boost investment returns, in December to
seek public opinion on the subject.
Under
the new rules, insurers will be allowed to invest
in money market and fixed-return products, stocks,
options, mutual funds and derivatives abroad.
The rules will allow insurers to invest up
to 15% of their total assets in the overseas
market. As the total assets of China's insurance
sector stood at 1.97 trillion yuan ($253.5
billion) by the end of last year, about 300
billion yuan can be invested overseas.
The
government has launched a slew of policies to
broaden the investment channels of insurers, such
as allowing them to pour money into infrastructure
projects and buy stakes in commercial banks.
"There will be concrete progress this year
toward letting insurers set up fund management
companies," said Sun.
The China Banking
Regulatory Commission (CBRC) is also working to
cooperate with regulators of other markets to
allow commercial banks - under the qualified
domestic institutional investors (QDII) program -
to invest money on behalf of their clients in
overseas stock markets, CBRC official Huang Wei
said at the forum.
Last month, the CBRC
allowed banks to invest in overseas equities and
structured equity products, but only in markets of
which regulators have signed memorandums of
understanding with the CBRC, namely Hong Kong.
The effort is seen as a way to boost
investment yields and make the QDII program more
appealing.
"The gradual [yuan]
appreciation and surging domestic stock prices
have hindered development of the program," said
senior CBRC official Yin Long. The government has
granted 22 banks a total quota of $14.8 billion
under the QDII scheme, Yin said. But the banks
have only "regrettably" invested $800 million to
$900 million overseas, he told a forum held by the
French bank Societe Generale.
"It is not
that we discourage overseas investment or that the
banks are not interested in that business," he
said, explaining that overseas investments by
QDIIs had been hindered by China's strong stock
market and expectations of yuan appreciation.
Market enthusiasm for the QDII scheme
launched last July has cooled as many investors
feared a rising yuan would eat into their
investment return, which came only from
fixed-income and money-market products.
After four years in the doldrums, China's
stock markets began to rebound at the beginning of
2006, with the benchmark Shanghai Composite Index
nearly doubling in a year.
Overseas
investment on behalf of clients will become a
major business trend for the banking sector,
because yuan appreciation cannot last forever and
the domestic stock market will stabilize
eventually, Yin said.
QDIIs are allowed to
invest up to 50% of their overseas investment in
stocks, but stock trading is still restricted to
Hong Kong, with a single holding capped at 5% of a
product's asset value.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
