Page 374 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
conditions to ensure sufficient credit. “The unavoidable conflict appeared to have complicated the entire reform
result is excess money supply growth, the worsening of process (Tang, Is China).
asset bubbles and a rapid increase in macroeconomic
leverage,” he said. While China’s official figures put the Insurance
non-performing loan ratio at 1.86 percent at the end of
June 2018, the real level of bad assets on Chinese bank China is expected to become the world’s largest
balance sheets could be much higher if shadow banking insurance market by 2028. The US is currently is the
activities are brought back onto their books. world’s largest insurance market. It’s worth US$1.33
trillion and represents over 30 percent of global premium
While Beijing is telling banks to speed up lending for income. “Long-term forecasts are currently particularly
local government infrastructure projects to stabilize the difficult, the insurance markets are undergoing
economy, it wants to avoid repeating the problems that fundamental change,” said Kathrin Brandmeir,
would be caused by an all-out stimulus like the one in economist at Allianz Research. “However, from our point
2008, when massive government spending programs of view, this disruption also offers great opportunities.
were rolled out to counter the external shock from the With new technologies, insurance cover can be made
global financial crisis and banks lent trillions of yuan to accessible and tangible for more people, and insurance
finance the spending spree. Unlike Western economies products can become more attractive,” she added. For
that rely on capital market for corporate funding, China’s 2017, premium income in life insurance in industrialized
state-owned banking institutions extend the vast countries shrank by 0.5 percent mainly due to weak
majority of credit in the domestic financial system and development in Western Europe, which generates 30
follow the government’s directives on which sectors to percent of global premium income. However, with 17.2
support (Tang, Chinese Banking Sector). percent growth in premiums in life, emerging markets
reported positive trend notably. China accounts for
But foreign financial firms retain strong doubts about 80 percent of the approximately 60 billion euros in
throughout most the rest of 2018 about how China’s additional premiums in life in those countries. The shift
financial opening-up would proceed, and under in weight towards the emerging markets will continue
what conditions, with the trade conflicts with the US unabated in the coming years. At the end of the 2020s,
complicating matters by putting pressure on China to around 40 percent of global premium income should be
do more, something China loathed to be seen to be written in this country group. Ten years ago, this figure
responding to. “We are making preparations, hoping was still below 10 percent (Xinhua, China on Track).
that a few qualified foreign players can have their
fully owned and fully licensed financial subsidiaries in China’s insurance regulator released in March 2018
China in three years,” Premier Li Keqiang explained. In new regulations on asset liability management in
April, the Chinese government released a timetable the sector, deciding to test the rules for one year in a
for allowing full foreign ownership of financial firms. latest step to prevent asset-liability mismatch risks.
The restriction limiting foreign ownership of Chinese The regulations include supervising standards for work
banks to stakes of less than 50 percent was scrapped procedures, performance assessment, asset-liability
straight away, with promises that ownership limits on conditions as well as management reports, according to
Chinese securities and insurance operations would China Insurance Regulatory Commission (CIRC). During
get the same treatment in three years, although there the trial period, insurance companies are required
were still many technical issues to solve. But nearly six to formulate asset-liability management reports and
months after the bank ownership limit was lifted, none submit to the regulator within a month following each
of the foreign applications to open fully owned banks quarter. After the regulations are officially launched, the
in China had been approved. Finance is a “relatively regulator said it will categorize the insurance companies
special sector” and its opening-up should “proceed in into four groups and take differentiated policies for
an orderly fashion,” Li cautioned. “It’s necessary for a them (Xinhua, China Regulator Tests).
big economy like China to maintain financial stability.”
The financial system is the foundation of the Chinese A revised regulation on investment in insurance
economy and the ruling Communist Party desperately companies came into effect on April 2018, a proactive
wants to maintain tight control of it. Ironically, the trade approach by the Chinese government to financial risk.
374
conditions to ensure sufficient credit. “The unavoidable conflict appeared to have complicated the entire reform
result is excess money supply growth, the worsening of process (Tang, Is China).
asset bubbles and a rapid increase in macroeconomic
leverage,” he said. While China’s official figures put the Insurance
non-performing loan ratio at 1.86 percent at the end of
June 2018, the real level of bad assets on Chinese bank China is expected to become the world’s largest
balance sheets could be much higher if shadow banking insurance market by 2028. The US is currently is the
activities are brought back onto their books. world’s largest insurance market. It’s worth US$1.33
trillion and represents over 30 percent of global premium
While Beijing is telling banks to speed up lending for income. “Long-term forecasts are currently particularly
local government infrastructure projects to stabilize the difficult, the insurance markets are undergoing
economy, it wants to avoid repeating the problems that fundamental change,” said Kathrin Brandmeir,
would be caused by an all-out stimulus like the one in economist at Allianz Research. “However, from our point
2008, when massive government spending programs of view, this disruption also offers great opportunities.
were rolled out to counter the external shock from the With new technologies, insurance cover can be made
global financial crisis and banks lent trillions of yuan to accessible and tangible for more people, and insurance
finance the spending spree. Unlike Western economies products can become more attractive,” she added. For
that rely on capital market for corporate funding, China’s 2017, premium income in life insurance in industrialized
state-owned banking institutions extend the vast countries shrank by 0.5 percent mainly due to weak
majority of credit in the domestic financial system and development in Western Europe, which generates 30
follow the government’s directives on which sectors to percent of global premium income. However, with 17.2
support (Tang, Chinese Banking Sector). percent growth in premiums in life, emerging markets
reported positive trend notably. China accounts for
But foreign financial firms retain strong doubts about 80 percent of the approximately 60 billion euros in
throughout most the rest of 2018 about how China’s additional premiums in life in those countries. The shift
financial opening-up would proceed, and under in weight towards the emerging markets will continue
what conditions, with the trade conflicts with the US unabated in the coming years. At the end of the 2020s,
complicating matters by putting pressure on China to around 40 percent of global premium income should be
do more, something China loathed to be seen to be written in this country group. Ten years ago, this figure
responding to. “We are making preparations, hoping was still below 10 percent (Xinhua, China on Track).
that a few qualified foreign players can have their
fully owned and fully licensed financial subsidiaries in China’s insurance regulator released in March 2018
China in three years,” Premier Li Keqiang explained. In new regulations on asset liability management in
April, the Chinese government released a timetable the sector, deciding to test the rules for one year in a
for allowing full foreign ownership of financial firms. latest step to prevent asset-liability mismatch risks.
The restriction limiting foreign ownership of Chinese The regulations include supervising standards for work
banks to stakes of less than 50 percent was scrapped procedures, performance assessment, asset-liability
straight away, with promises that ownership limits on conditions as well as management reports, according to
Chinese securities and insurance operations would China Insurance Regulatory Commission (CIRC). During
get the same treatment in three years, although there the trial period, insurance companies are required
were still many technical issues to solve. But nearly six to formulate asset-liability management reports and
months after the bank ownership limit was lifted, none submit to the regulator within a month following each
of the foreign applications to open fully owned banks quarter. After the regulations are officially launched, the
in China had been approved. Finance is a “relatively regulator said it will categorize the insurance companies
special sector” and its opening-up should “proceed in into four groups and take differentiated policies for
an orderly fashion,” Li cautioned. “It’s necessary for a them (Xinhua, China Regulator Tests).
big economy like China to maintain financial stability.”
The financial system is the foundation of the Chinese A revised regulation on investment in insurance
economy and the ruling Communist Party desperately companies came into effect on April 2018, a proactive
wants to maintain tight control of it. Ironically, the trade approach by the Chinese government to financial risk.
374
