China marked the third anniversary of its official accession to the World Trade Organization (Dec. 11, 2001) with the announcement that it will no longer restrict foreign firms’ access to its insurance market to specified zones within the country.
A report on the People’s Daily Internet site said: “Starting from December 11 there would be no locality limits on foreign firms engaged in commercial retail and distribution. Designated operation for five kinds of goods and materials such as steel has been repealed since December 11. In service trade areas such as insurance, securities, banking and financing, tourism, transportation and storage relevant locality limits and business scope limits on foreign companies have also been annulled on the same day.”
The widely reported decision will give new impetus to foreign investments in China’s burgeoning economy. It also evinces China’s ability to compete in the financial services and insurance sectors on an increasingly equal basis with foreign companies.
The impact, however, may not be too significant, as most of the foreign investments in China’s insurance industry are made in the rapidly developing coastal areas and the regions around Beijing and Shanghai. There is a considerable eceonomic difference between these areas, which have been open to foreign investment, and large sections of the rest of the country.
The China Insurance Regulatory Commission (CIRC) also announced that as of Dec. 11, foreign brokers would be allowed to hold up to a 51 percent share in Chinese affiliates. There was no indication that the CIRC plans to change the rule that limits foreign insurers to a 50 percent stake with Chinese partners in joint venture agreements (except for AIG’s previously negotiated exception).
According to the CIRC’s latest statistics, as of the end of November 2004, 40 foreign insurers (23 life companies, 14 P/C companies and 3 reinsurers) had established 73 offices in China; net premiums in 2003 exceeded $800 million, while total assets topped $3 billion.
Topics China
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