Approved by the State Council, Provisional Regulation on Stock Investment Management for Insurance Institutional Investors was jointly issued by China Insurance Regulatory Commission (CIRC) and China Security Regulatory Commission (CSRC), permitting the insurance institutional investors to invest directly in Chinese stock market.

The issue of Provisional Regulation on Stock Investment Management for Insurance Institutional Investors will not only broaden the investment channels for insurance capital, but also inject vitality into the Chinese stock market. It is an important step for CIRC and CSRC to have actively carried out in line with the relevant rules in the National Nine Policies for Stock Market that encourage qualified capital to enter the market. It is an indication to show the country's determination to devote major effort to developing the capital market.

Currently, the total asset of China's insurance industry has exceeded 1.1 trillion Yuan. According to the highest limitation of investment stock proportion of 5 percent, the total amount of insurance capital that is permitted to enter the market is supposed to be between 50 to 60 billion Yuan. Prior to this, confined to limited investment channels such as bank deposit, national debt, financial debt, security investment fund, enterprise debt, the appreciation space for insurance capital was quite restricted.

The entrance of the insurance capital into the stock market not only benefits insurance companies in terms of broadening the investment channels, increasing capital potentials and dispersing investment risk, but also supervises and urges them to gradually cultivate and improve the operational capability of insurance capital. Apart from that, the form of such concepts as the long-term concept and value investment concept will lead insurance companies toward professional and internationalized orientation for development.

The allowance of insurance capital's direct entry into the market will not only enlarge the capital supply in the market, but also help improve the investors' structure and the sustainable growth of the market. The stock market in China doesn't have a long history and its current scale is not very large either. Therefore, the market can not fully satisfy the social financing investment demand. The proportion of institutional investors is not high, which bears distinctive feature of a scattered market. Insurance capital, especially the life insurance capital, has the characteristics of prolongation, stability as well as largeness in scale, which will provide the market with long-term stable cash flow and boost the structural reform among investors.

Additionally, the tendency of stressing the long-time benefit of capital among the institutional investors is conducive to improve the stockholders' structure and perfect the modern enterprise system of the listed companies. Furthermore, insurance institutional investors' entrance into the market will make greater demands on security investment funds and its operational level, which is helpful to the security market in establishing a sensible investment concept, thereby bringing about the maturity of the security market.

The implementation of the Regulation has given the market an utmost encouragement. However, we must sensibly realize the stock market is very risky though it can bring handsome profits to investors as compared with other investment channels. Nothing is more important than the safety once the insurance capital is in circulation since it is the fund for life or for disaster relief for policy holders in times of emergency. Insurance institutional investors should be extremely cautious in investment decision-making, gradually raise the level of investment decision-making and strengthen the construction of a mechanism for risk prevention.

Apart from that, the allowance of insurance capital's entrance into the market deepens the connection between the stock market and the insurance market, and forms a mechanism in which risk is easy to infiltrate and transmit. Therefore, regulatory departments at various levels are required to work closely together to enhance the regulatory information exchange and harmonious cooperation while tightening the rules and stopping up all loopholes. Meanwhile, the regulatory departments should also carry out all the orders without exception and severely punish those who violate the regulations and disciplines. All departments involved are expected to strictly implement the relevant rules and regulations, and strengthen the mechanism of responsibility investigation. For those activities that breach the rules, disturb the normal order of market and infringe stockholders' interests will be punished without leniency so as to serve as a warning to others.

For the capital market of over 4 trillion Yuan, the impetus brought about by nearly 60 billion Yuan insurance capital cannot be underestimated. As far as the insurance institutional investors are concerned, the stock market is like a rich and alluring mine but full of risks. China's insurance is undergoing an unprecedented development with a promising future ahead of it. Meanwhile, the stock market in China is also improving and advancing with great pace. We hope that with the Regulation as a driving force, all relevant parties will find a multi-beneficial way that prospers the country and enriches the people.

By People's Daily Online