Beijing Tells Insurance Sector Not to Covertly Fund Local Governments


China’s insurance regulatory has cautioned the country’s insurance funds against providing covert funding to local governments, amidst a crackdown on regional debt.

Chen Wenhui, deputy chair of the China Insurance Regulatory Commission, said over the weekend that the use of “fake creativity” by insurance funds must be prohibited, and that the sector should instead focus on servicing the real economy, according to a report from the Xinhua News Agency.

Chen said insurance funds should pursue long-term value investment and diversified investment, as well as “guide” investments that serve the real economy in consonance with national strategy.

The warning comes in the second year of an ongoing deleveraging campaign launched by Beijing, as well as a crackdown on the covert financing and debt levels of China’s local government.

The National Development and Reform Commission and the Ministry of Commerce recently issued the “Notice on Further Strengthening the Ability of Corporate Bonds to Service the Real Economy, and Strict Prevention of Local Government Debt Risk” (关于进一步增强企业债券服务实体经济能力严格防范地方债务风险的通知), which seeks to curb “covert” increase in the debt levels of local government.