China gives go-ahead for insurance companies to invest in stock market

Pedro Gonçalves
clock • 1 min read

Beijing will slash regulation currently restricting insurance companies’ investment in equities in a further bid to channel funds into China’s ailing stock markets.

The China Banking and Insurance Regulatory Commission has published a first draft of new guidelines that would lift limits on how much and in what insurers can invest, specialised media outlet Caixin reports.

Insurance firms can currently only buy shares of fellow insurance companies, non-insurance financial companies and companies linked to the insurance sector such as health-care and auto services. Investments are capped at 30% of a company’s assets.

CBIRC was quoted by the publication as saying that the permission will offer long-term, stable funding support for listed companies and will help mitigate liquidity risks related to shares pledged as collateral for loans.

The regulator said that the move will help increase the efficiency of capital movements in the real economy. According to official data, at the end of 2017 the insurance sector was worth up to Rmb 16.8trn ($2.7trn).

As per the CBIRC’s new rules, only insurance asset management firms can establish specialised investment products, provided they have not been subject to administrative penalties during the last three years.

The amounts invested in equities through the specialised products will not be subject to existing restrictions on stock investments based on insurers’ total assets and CBIRC will oversee the investment products in the same way as other financial investments.