Wu Dingfu, chairman of China Insurance Regulatory Commission (CIRC), said recently as China is speeding up the opening up process more foreign-funded insurance companies will flow in and the cooperation between insurance industry and international capital market will be further deepened and developed.

During the China Insurance Industry Heading for International Capital Market Forum held in Beijing Wu Dingfu said in recent years integration of global economy driven by international capital flow and high-innovative technologies keep on developing. Under the new circumstances China's insurance companies need to strengthen cooperation with international capital market at an even higher level.

According to released data currently China's insurance industry has had more than $7 billion employable foreign funds. These are mainly from the operation funds of foreign insurers in China, capital and stock increases and foreign capitals raised in overseas listing by domestic-funded insurers and foreign-currency funds generated during the business operation of insurance companies. Last year the overseas listing of China Life itself raised funds of $3.475 billion. To increase fund utilization efficiency the CIRC has, together with relevant departments of the State Council, begun to consider allowing these insurance funds to be used overseas as soon as possible.

Zhou Xiaochuan: Raise direct fund-raising proportion and reduce insurance industry entry restrictions

Zhou Xiaochuan, governor of People's Bank of China (PBC), made a keynote speech during the same occasion. He said considering that direct fund-raising takes up very little proportion in China's macro-economic operation and indirect fund-raising makes up too high a proportion China should gradually reduce insurance industry entry restrictions and give full play to the role of insurance companies as an important institutional investor, so as to promote the continued development and standardization of capital market.

Zhou Xiaochuan pointed out that in China's macro-economic operation M2 supply makes up an excessive proportion in GDP. Until 2003 the ratio of M2 against GDP is 200 percent much higher than those of other countries. Commercial banks, while providing enterprises with current funds, have a huge amount of fund for long-medium term loans. These long-medium term loans become long-medium term investments through enterprises resulting in a low proportion of direct fund-raising and a high proportion of indirect fund-raising. Therefore the commercial banks have to bear a great deal of investment risks making asset-liability management and risk control difficult for the banks.

In order to increase the direct fund-raising proportion capital market must be vigorously developed and standardized. Zhou Xiaochuan said in the past the emphasis of capital market development and standardization was put on the construction of relevant laws and regulations. Now it appears that we should pay more attention to the maturation of market institutions, the correct orientation of various institutions and the nurturing of market concept etc. In this respect as the main body of market institutional investors should bring into play their important function.

By People's Daily Online