Following the resumption of bilateral trade treaty talks between China and the United States, a 100-day plan was mooted which promised to improve trade ties going forward (for further details please see "Presidential summit postulates rise of insurance investment ceiling"). One area of focus in this regard has been the foreign ownership limits that apply to inbound investment in Chinese financial services groups, including those pertaining to the country's insurance industry.

To date, a key restriction for inbound investment in China's domestic insurance industry has been a foreign investment limit of up to 50% of the capital value of a domestic life insurer. Following President Donald Trump's visit to Beijing in November 2017, Vice Minister of Finance Guangyao Zhu made a symbolic announcement that some of these long-running restrictions on foreign ownership in the sensitive financial services industry.(1)

One specific commitment announced was the increase of the existing 50% limit on foreign ownership in Chinese life insurers to 51% in three years and the complete removal of such limit in five years.(2) This was the only commitment for which a clear timeline was provided.(3) Previously, foreign-invested capital was restricted to 50% of a life insurer's total capital (with non-life insurers having no such restriction). While this change has been made at the policy level, the China Insurance Regulatory Authority (CIRC) will have to implement it in due course.

The easing of limits on foreign ownership promises to be an important concessionary step in the continuing liberalisation of China's financial services markets since it joined the World Trade Organisation in 2001. Shares in AIA, one of the most Asian-focused overseas insurers, jumped significantly following the announcement.(4) The policy shift has given rise to expectations that further foreign investment in the insurance industry, including the acquisition of stakes in existing Chinese insurers, will increase significantly as rhetoric is translated into action.

The use of joint ventures and limits on control provide a means for protecting domestic companies from full competition, as well as encouraging the sharing of technology and know-how. However, policymakers and the governor of the People's Bank of China, Zhou Xiaochuan, have recognised that the Chinese financial system could now benefit from an increase in foreign competition.(5) Opening up the domestic market to allow overseas institutions more direct influence in governance, coupled with an increase in competition if it materialises, may provide the Chinese insurance industry with greater efficiencies and a lowering of overall risk at a crucial time in its development.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

For further information on this topic please contact Hao Zhan, Zhang Xianzhong, Wang Xuelei or Yu Dan at AnJie Law Firm by telephone (+86 10 8567 5988) or email (,, or The AnJie Law Firm website can be accessed at


(1) Further information is available here.

(2) Further information is available here.

(3) Further information is available here.

(4) Further information is available here.

(5) Further information is available here.