Green light to overseas investment by Chinese insurers

China is formulating policies on overseas investment and foreign exchange trading by Chinese insurers, which would involve nearly 8 billion US dollars worth of their foreign exchange capital, the country's insurance watchdog said.

Ma Delun, vice-director of the State Administration of Foreign Exchange, said the State Council, or the Chinese government, had given a green light to overseas investment by Chinese insurers "in principle".

Addressing a recent seminar on overseas investment by Chinese insurers, the vice-director said the majority of the foreign exchange assets of the Chinese insurance sector have been put in domestic banks as deposits as there are few other investment alternatives. But the interest rates of the deposits are going down constantly.

A small amount of the assets has been used for lending among insurance companies and purchasing domestic bonds denominated in foreign currency.

A survey conducted by the administration shows that by the end of last year, all of the 50 insurance companies surveyed put 29.8 percent of their foreign exchange capital in banks as current deposits, and 90.1 percent as fix-term deposits.

But difficulties remain for overseas investment strategy due to a lack of skilled professionals and knowledge about corporate governance, said the official.

Wu Xiaoping, vice-chairman of the China Insurance Regulatory Commission, said the amount of disposal capital of the country's fledging insurance sector stood at 952.4 billion yuan (116.1 billion US dollars).

The official said 52.5 percent of the premium revenue has been invested as bank deposits, and bonds account for 31 percent of the total investment of the sector, and 6.86 percent of the revenue was used in fund investment.

There were few long- and medium-term investment products available for the sector as China's young financial market has yetto be developed, said the vice-chairman.

Premiums in China's insurance industry totaled 338.04 billion yuan (40.87 billion US dollars) in 2003, a year-on-year rise of 27.1 percent, while the industry's total assets were worth 912.28 billion yuan (110.31 billion US dollars) by the end of last year.

Source: Xinhua