Chinese insurance and securities watchdogs on Sunday issued and put into effect regulations on stock investment by insurers. This is the first time that direct investment of insurance funds in the stock market has been given a green light.
The regulations of the China Insurance Regulatory Commission and China Securities Regulatory Commission allow insurers to invest in the stock market under strict supervision.
Before now insurance funds in China were only permitted to be invested in bank deposit, public debt, financial debt, securities investment fund, corporation debt and other limited investment channels.
Under the new regulations, the investment of insurance funds can go to ordinary Renminbi stocks, transferable company bonds and other investment products approved by CIRC. The annual investment of an insurer cannot exceed 5 percent of the total assets that it reports at the end of the previous year.
Currently, China's insurance industry has total assets of 1.1 trillion yuan (US$133 billion) and nearly 60 billion yuan (US$7.2 billion) from the sector is expected to enter the stock market.
By the end of August, the surplus of insurance funds in the country exceeded one trillion yuan (US$120 billion), an increase of 39 percent compared with the same time last year.
CIRC sources said the increasing surplus created a favorable environment for the changes, but warned that investment risks should never be neglected.
(Xinhua News Agency October 25, 2004)
