China to step up oversight of insurance funds

Regulator to focus on 'irrational' fundraising, foreign acquisitions

BEIJING • China will strengthen its supervision of overseas investment risks and capital flows from insurance funds, its insurance regulator said yesterday, adding that it will urge companies to improve their risk-monitoring systems.

The China Insurance Regulatory Commission (CIRC) will step up supervision over the use of insurance funds, with focus on "chaos" such as irrational stock market fundraising and overseas acquisitions, said Mr Guo Jing, vice-head of CIRC's finance and accounting department.

"The regulator will prevent risks stemming from an excessively rapid growth in overseas investments, via window guidance from the authorities and stepped-up information disclosure," he added.

The remarks coincided with separate media reports that the nation's central bank is drafting a package of reforms which would give foreign investors greater access to China's financial services industry, said people familiar with the matter.

The People's Bank of China is scheduled to convene an internal meeting today to discuss its proposals and get feedback from Chinese institutions, the people said.

While the details of the plan have yet to be finalised, it may include permission for foreign institutions to control their local finance-sector joint ventures, as well as raising the current 25 per cent ceiling on foreign ownership in Chinese banks, the people said.

Currently, overseas investment banks can hold only minority stakes in their local securities joint ventures, and have been largely excluded from lucrative businesses such as secondary-market trading in Chinese debt and equities, as well as from managing money for wealthy clients.

But last month, China's Cabinet said the country will continue to open up various industries, including banking, securities, electric cars as well as insurance.

CIRC vice-chairman Chen Wenhui said earlier this month that the nation will open up its insurance market further, even as CIRC stepped up supervision over the use of insurance funds by local businesses. It had cracked down on "irrational" overseas investment, which it suspected was one way of disguising capital flight as the yuan currency weakened.

The yuan has staged a sharp turnaround in recent months and outflows have dwindled, but the authorities have shown no signs of easing their campaign. Some overseas investments have been derailed due to heightened official scrutiny, like the scrapping of plans by the Dalian Wanda Group to buy Nine Elms Square in London.

The insurance regulator will also urge insurance companies to conduct self-checks on their property investments, Mr Guo said yesterday. It will continue to strictly control insurance money from flowing into property markets and prohibit funds from directly or indirectly investing in commercial buildings, he added.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on September 19, 2017, with the headline 'China to step up oversight of insurance funds'. Print Edition | Subscribe