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China's insurance and securities industries are stepping up their integration with overseas markets as the country approaches the third anniversary of its World Trade Organization (WTO) membership.
More Chinese insurance companies will be listed overseas in the coming years in order to enhance their financial strength and international competitiveness, a top insurance regulator said on Friday.
Wu Xiaoping, vice-chairman of the China Insurance Regulatory Commission, said the authorities support qualified insurers to raise fund in international capital market or join international competition via other types of capital operations.
"As the insurance industry matures, more companies will be listed overseas," he said at the 2004 International Finance Forum in Xianghe County, north China's Hebei Province.
Since 2003, three Chinese insurers, PICC Property and Casualty Co, China Life Insurance and Ping An Insurance, have been listed overseas, while none has gone public in the domestic market.
The insurance sector has been leading all financial businesses in terms of overseas listings and opening up to foreign investors.
China will lift all geographical restrictions on foreign insurers at the end of the year, according to its WTO commitments. Foreign life insurers can also join individual health insurance, group insurance and pension businesses at that time, said Wu.
Compared to insurance, China's securities business has been rather slow in the move to introduce foreign investors, except for the fund management sector, but hopefully the pace will increase, as more global investment banks are moving in.
Hu Zuliu, managing director of Goldman Sachs (Asia) Ltd, said on Friday the Chinese authorities had approved the company's launching of a joint venture investment bank on the mainland.
He did not give details on the matter or when the venture would be set up. But insiders said that Goldman Sachs may seek actual control of the prepared venture via partnership with a newly-established Chinese securities company, Haohua Securities, led by mainland investment banker Fang Fenglei, which had financing from Goldman Sachs.
Only two joint venture securities firms have opened businesses in China since its WTO entry.
One reason for the slow progress of the investment banking opening-up is that foreign companies cannot get control of joint ventures according to existing rules, said Deborah Lehr, chairwoman of MBP Consulting Ltd. And it is hard to find a satisfactory partner, she said.
China only allows foreign companies to hold a maximum 33 per cent stake in a joint venture securities house and such ventures are not allowed to do renminbi brokering.
But the securities business has actually been suffering from losses for several years, due to narrow profit resources and business scale and the bearish performance of the bourses.
Experts have predicted a trend of restructuring in the business, during which a number of poorly performing securities firms will drop out.
Foreign investment banks are expected to be active players in the reshuffle, either through buying into an existing securities firm or launching a new venture.
Wang Dongming, chairman of CITIC Securities, one of the leading players in the industry in China, said some internationally competitive financial institutions would hopefully emerge in China in the future as the country's financial industry catches up with international standard.
It is also suggested that more domestic financial institutions should step out to explore the overseas market, via channels like the qualified domestic institutional investor (QDII) scheme, which would allow domestic institutions to invest in overseas capital markets.
Hu Zuliu of Goldman Sachs predicted that China should adopt the QDII scheme in the foreseeable future as the pressure for relaxing controls on the capital account intensifies. And the number of institutional investors in the domestic market will also increase.
(China Daily November 13, 2004)
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