On Wednesday, 1 May, Guo Shuqing, Chairman of the China Banking and Insurance Regulatory Commission (CBIRC), announced twelve new measures that will further open up China’s USD 44 trillion financial sector to foreign investment. The measures are extensive and cover many areas of China’s financial system, including banks, trust companies, consumer finance companies and insurance companies and intermediaries. The two key reforms targeting the insurance industry are as follows:
- The CBIRC will allow foreign financial institutions to invest in foreign-invested insurance companies (i.e., companies in which foreign shareholding is already at or above 25%). This is a major development, as foreign insurance companies are currently the only foreign investors permitted to invest in such companies; and
- The CBIRC will eliminate the requirement that, prior to entering the Chinese market, foreign insurance brokerages have been in operation for no less than 30 years and have total assets of no less than USD 200 million. This is a significant change as it considerably widens the field of foreign brokerages eligible to enter China’s market.
Guo Shuqing further indicated that the CBIRC will allow foreign insurance group companies (as opposed to individual companies) to invest in or establish insurance companies. Similarly, it will also allow foreign-invested domestic insurance group companies to establish insurance institutions, provided that such investments meet certain qualification requirements.
Finally, Guo Shuqing further indicated that the CBIRC will “encourage and support” foreign financial institutions to collaborate with Chinese non-state-owned banks and insurance companies in equity, business, technology and other areas. At this juncture, no details are available on the exact form of the cooperation contemplated by the CBIRC or the nature of the “encouragement and support” that it intends to offer.
To be clear, Guo Shuqing stated that the above measures are all part of the Chinese government’s agenda to reform and modernize its financial sector and are all motivated by domestic economic considerations. However, many observers view this announcement as an attempt to facilitate an end to the China-US trade war. Indeed, the timing of Guo’s announcement coincides with the latest round of trade talks in Beijing between US Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He. Either way, these new measures are certainly part of a much larger reform effort, which the Chinese government initiated in 2017, to open and liberalize China’s financial sector, in particular its insurance sector. Winston & Strawn’s 2018 China Insurance Review outlines the key reforms that China has announced and implemented thus far.
Guo Shuqing did not provide a specific timeline for implementation. However, a CBIRC spokesperson has indicated that it will “soon” issue revised rules and regulations for foreign banks and foreign insurance companies in accordance with the new reforms. We will continue monitor the progress of these reforms and provide updates as they become available.