MONDAY, APRIL 25, 2005
Chinese insurers told to bring in strategic investors
REUTERS
BEIJING: China's insurance regulator has told domestic insurers to bring in more strategic investors to help improve their managerial structures, the 'China Securities Journal' reported on Monday.
Such strategic investors could be foreign or domestic, Wu Xiaoping, vice chairman of China Insurance Regulatory Commission, told a conference. Major shareholders currently have too much influence, Mr Xiaoping said.
Beijing wants to inject foreign capital and expertise into the sector, which is facing hundreds of billions of dollars in policy obligations and is rapidly opening to overseas competition.
Foreign players from HSBC Holdings to Goldman Sachs Group have picked up strategic stakes in the country's largest insurers, such as China Life Insurance and Ping An Insurance.
Mr Xiaoping said good shareholding structures were a priority for improving managerial arrangements. New shareholdings could also bring capital and strategic cooperation, which were equally important. The government is also encouraging strategic investment in the banking industry, partly to bring in expertise in international best practice.
It has also told insurers that they could work with foreign companies in the asset management business. In February, it said the industry could set up between six and eight joint-venture asset management companies by the end of the year, boosting returns and improving competitiveness.
Mr Xiaoping said the commission will intensify its supervision of insurance company boards, examine the qualifications of board members and support the establishment of special board committees.
In other countries, board committees are used to supervise particular areas of management, such as risk controls. "Chinese insurance companies so far have only established frameworks for restructuring", Mr Xiaoping added. He said the commission was working on regulations that would help insurance companies prevent major shareholders from steering them into illegal business with associates or misappropriating funds.
In keeping with its World Trade Organisation Commitments, China has lifted restrictions on where foreign insurers could operate and what products they could offer.
With Chinese insurers facing increasing competitive pressure from foreign players, such as American International Group, Beijing is also widening the scope of investment choices available to domestic firms.
Foreign insurers account for 37 of the 61 firms operating in the rapidly growing market, though Chinese insurers still have dominant market share.
Total foreign capital in the Chinese insurance market reached 194.8bn yuan ($23.5bn) in '03, up from only 4bn yuan in 1999, state media reported this month.
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