In 2004 the China Insurance Regulatory Commission (CIRC) and the People's Bank of China (PBC) jointly released the Interim Measures for the Administration of Overseas Use of Foreign Exchange Insurance Funds (2004/9), allowing insurance companies to make overseas investments using their own foreign exchange insurance funds within a prescribed scope. In 2005 the CIRC issued the Rules for the Implementation of Interim Administrative Measures for the Use Overseas of Foreign Exchange Insurance Funds (2005/77), which opened up some overseas investment channels and imposed limits on the scope of investment and the proportions of products to be invested.

By 2007, due to the continued growth of both the national trade surplus and foreign investment in China, the demand for overseas use of insurance funds had increased rapidly. The CIRC, the PBC and the State Administration of Foreign Exchange jointly released the Interim Measures for the Administration of Overseas Investment with Insurance Funds (2007/2), which opened a strategic channel for the investment of insurance funds in foreign markets. In 2012 the CIRC released the Detailed Implementation Rules for the Interim Measures for the Administration of Overseas Investment with Insurance Funds (2012/93), which significantly expanded the scope and range of products for investment in foreign markets.

Alongside the 2007 interim measures and detailed implementation rules mentioned above, the CIRC-released regulations presently in force include the Interim Measures for the Administration of the Utilisation of Insurance Funds (2014/3) and the Notice of the China Insurance Regulatory Commission on Strengthening and Improving the Regulation over the Percentages of Various Uses of Insurance Funds (2014/13).

This update summarises the main developments in regulation of overseas use of foreign exchange insurance funds, including a comparison of the old and new foreign exchange insurance fund regulations.

Operational structure

Under the old regulations, insurance companies could entrust investment management to an overseas professional investment institution that satisfied the requirements stipulated in Article 14 of the 2004 interim measures. Article 4 of the 2004 interim measures explicitly stipulated that insurance companies should entrust responsibility to trustees or custodians in accordance with these measures, who would respectively be responsible for overseas investment operations and custody supervision of insurance funds. The 2007 interim measures and 2012 detailed implementation rules explicitly stipulate the qualifications, competence and obligations of insurance companies, trustees and custodians (including the agents of custodians).

Investment entity

The previous requirement for an overseas investment entity to have total assets (as of the previous year) of no less than Rmb5 billion has been abolished. Further, the range of qualifying insurance companies has been expanded to cover the entire industry. While previously only a few insurance companies such as PICC, China Life and PingAn could qualify as overseas investment entities, now all companies – Chinese or foreign, big or small – can compete on equal ground.

Source of insurance funds

Under the old rules, insurance funds which could carry out overseas investment were restricted to the use of self-owned foreign exchange funds to do so. Although in 2006 the CIRC approved the use by insurance companies of foreign exchange purchases to implement overseas investment, this had not been explicitly codified until the release of the 2007 interim measures, which stipulate:

"For the purpose of these Measures, 'insurance funds' shall mean self-owned foreign exchange funds, foreign exchange funds purchased with Renminbi, and assets coming from overseas investment of aforesaid funds."

This provision ensures that foreign exchange purchasing funds can effect free settlement, which is a breakthrough for overseas investment with insurance funds. Under the regulations, insurance institutions can not only choose to operate using renminbi and foreign currencies, but also manage foreign exchange risk effectively.

Scope of investment

Investable countries and regions
The 2012 detailed implementation rules have expanded the range of investable overseas investment financial markets for insurance funds (previously only Hong Kong and Macau) to cover:

  • 25 developed markets, including Australia, the United States and the United Kingdom; and
  • 20 emerging markets, including Brazil, Poland, Taiwan and India.

Investable products
Under the old regulations, the range of products for overseas investment included money market products (ie, commercial bills, negotiable certificates of deposits, repurchase and reverse repurchase agreements and money market funds) and fixed-income products (ie, bank deposits, structured deposits, bonds, convertible bond funds, bond funds, securitised products and trust-type products). The 2007 interim measures have expanded that range to include equity products such as stocks, equity funds, equity and equity-type products.

The 2007 interim measures further stipulate that investment in derivatives is allowed provided that it shall not be used for speculation or scale trading. They also prohibit the use of the funds to:

  • provide a guarantee for other organisations or individuals with insurance funds for overseas investment;
  • engage in speculative foreign exchange trading;
  • engage in money laundering;
  • make use of overseas investment activities with insurance funds to collude with other organisations or individuals for illegal interests; or
  • engage in conducts prohibited by relative domestic and overseas laws and regulations.

The 2012 detailed implementation rules impose requirements on the investable products provided in the 2007 interim measures, including the following:

  • The issuing body for any market instrument (including securities used as collaterals under reverse repurchase agreements) must have at least an A (or equivalent) credit rating.
  • Direct investments in the equity of unlisted companies must be limited to the equity of enterprises engaging in finance, aged care services, healthcare, energy, resources, automobile services or modern agriculture.
  • Overseas real estate investment and overseas funds investment are allowed, but the region of the investable overseas real estate must be located in the major cities of the 25 investable developed markets, and the investable overseas funds must meet the requirements of the 2012 detailed implementation rules.

Proportion of overseas investment

Under the old rules, the proportion of overseas investment as a total of a company's assets was regulated separately.

The 2007 interim measures provide that the aggregate proportion of overseas investment must not exceed 15% of the total assets (measured as of the end of the previous year) and that the proportion of single investors must be in line with the CIRC's rules. This has provided great flexibility for insurance institutions to decide their own structure and strategy, allowing them to make the best of market opportunities, discover resources and optimise their investment portfolio.

In addition, due to the risk still present in emerging markets, the 2012 detailed implementation rules explicitly provide that the total amount of investment in investable emerging markets may not exceed 10% of the previous year's total assets.

Approval procedure

The 2007 interim measures have abandoned the previous practice of individual approval, instead adopting established international practice wherein the CIRC considers qualifications of the insurance companies, trustees and custodians all at once under the umbrella term, 'relevant parties to overseas investment with insurance funds'. Once the group of relevant parties has been granted approval, there is no need to make duplicate claims.


As is evident from recent developments, regulatory institutions are gradually expanding the scope of overseas investments with insurance funds. With the developing trend of mixed operations in the financial industry and the approach of a great era for funds management, it is probable that regulatory institutions will continue to implement minimal front-end regulation and strict back-end regulation of overseas investments with insurance funds – leading in turn to the further expansion of the front end. Insurance companies have great opportunities to realise the appreciation of assets through foreign investment. However, these opportunities are matched by strict requirements for strong internal control and risk management.

For further information on this topic please contact Hao Zhan or Yibin Xia at AnJie Law Firm by telephone (+86 10 8567 5988) or email ( or The AnJie Law Firm website can be accessed at

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