China Cancels Key Restrictions on Investment of Insurance Funds

China’s State Council has just flagged the loosening of key restrictions on the investment activities of insurance funds.

A meeting of the State Council convened by Premier Li Keqiang on 15 July called for “cancellation of sector restrictions for insurance funds undertaking financial equity investment.”

The State Council also flagged the “undertaking of equity investment and venture investment quota transfer trials in regional equity markets,” while also “encouraging financial institutions to undertake insurance operations in relation to equipment finance leasing and entrepreneurship.”

The “Insurance Fund Equity Investment Provisional Measures” (保险资金投资股权暂行办法) issued in 2010 stipulated that insurance funds could only be directly invested in insurance enterprises, non-insurance financial enterprises and insurance-related aged care, healthcare and automotive services.

Amendments made to the Measures in 2018 remove these restrictions, and stipulate that insurance funds can be invested in the equity of companies that satisfy the following nine conditions:

1. Lawfully registered and established and possess legal person qualifications;
2. Satisfy state industry policies, possess qualifications as stipulated by the relevant state authorities;
3. Shareholders and senior executives have excellent credit records and commercial reputations;
4. Industries are situated in growth or mature phases, or are new strategic industries, or possess clear intentions to list or comparatively high merger value;
5. Possess market, technological, resource or competitive advantages and room for value increases, and are expected to produce excellent cash returns, as well as possess a confirmed dividend systems;
6. The professional knowledge, industry experience and management capability of management teams corresponding to the professional duties they exercise;
7. No involvement in major legal disputes; asset ownership which is complete and clear, and no legal defects in relation to equity or ownership;
8. No affiliate relationship between the investment institution and the professional institution;
9. Other prudential conditions as stipulated by CBIRC.

At present however authorities have yet to release the final version of the “Insurance Fund Equity Investment Administrative Measures (Draft Version for Solicitation of Opinions” (保险资金投资股权管理办法(征求意见稿)), with the recent State Council meeting the latest source of information on the removal of other restrictions.

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