CIRCULAR OF THE GENERAL OFFICE OF THE STATE COUNCIL FOR TRANSMIT-TING THE REPORT SUBMITTED BY THE PEOPLE'S INSURANCE COMPANY OF CHINA ONDEVELOPING INSURANCE BUSINESS INVOLVING FOREIGN INTERESTS IN ORDER TOINCREASE FOREIGN EXCHANGE REVENUE
CIRCULAR OF THE GENERAL OFFICE OF THE STATE COUNCIL FOR TRANSMIT-TING THE REPORT SUBMITTED BY THE PEOPLE'S INSURANCE COMPANY OF CHINA ONDEVELOPING INSURANCE BUSINESS INVOLVING FOREIGN INTERESTS IN ORDER TOINCREASE FOREIGN EXCHANGE REVENUE
Important Notice:
This English document is coming from the "LAWS AND REGULATIONS OF THE
PEOPLE'S REPUBLIC OF CHINA GOVERNING FOREIGN-RELATED MATTERS" (1991.7)
which is compiled by the Brueau of Legislative Affairs of the State
Council of the People's Republic of China, and is published by the China
Legal System Publishing House.
In case of discrepancy, the original version in Chinese shall prevail.
Whole Document
CIRCULAR OF THE GENERAL OFFICE OF THE STATE COUNCIL FOR TRANSMIT-
TING THE REPORT SUBMITTED BY THE PEOPLE'S INSURANCE COMPANY OF CHINA ON
DEVELOPING INSURANCE BUSINESS INVOLVING FOREIGN INTERESTS IN ORDER TO
INCREASE FOREIGN EXCHANGE REVENUE
(November 30, 1985)
The Report on Developing Insurance Business Involving Foreign Interests in
Order to Increase Foreign Exchange Revenue, which was submitted by the
People's Insurance Company of China, has been approved by the State
Council and is hereby transmitted to you for you to act upon accordingly.
Report of the People's Insurance Company of China on Developing Insurance
Business Involving Foreign Interests in Order to Increase Foreign Exchange
Revenue
(Excerpts)
In accordance with the essence of the policies of the State on striving to
increase non-trade foreign exchange revenue, we have recently made a study
of the question as to how to develop insurance business involving foreign
interests in order to increase foreign exchange revenue. We now submit the
report on the relevant questions as follows:
Chapter I
With the implementation of China's policy of opening to the outside world,
the insurance business involving foreign interests handled by our
Insurance Company has developed rapidly in recent years. At present, there
are already over 40 types of insurance coverage. The handling of the
insurance business involving foreign interests so as to give financial
protection against risks (including material losses and indemnity
liability) involved in China's foreign trade and economic exchanges and
provide services with a view to preventing losses has played a positive
role in promoting China's foreign trade and economic exchanges and in
enhancing the confidence of foreign businessmen coming to make investment
in China.
Chapter II
As the income from the premiums of insurance involving foreign interests
is an important item of foreign exchange revenue of invisible trade, the
various countries in the world have attached great importance to and are
actively developing this business. At present, China's insurance business
involving foreign interests is developing at a relatively slow pace and
the premiums only account for a very small proportion of the State's total
non-trade foreign exchange revenue, which ill conforms with the new
situation in which China is implementing the policy of opening to the
outside world. Take, for example, the transportation insurance for import
and export goods the handling of which has lasted for a relatively long
time and the premium income of which ranks first. Only 50 percent of the
export goods is insured domestically and such bulk goods as petroleum,
which account for over one-third of the total export business volume of
China, are rarely insured with our Company. Nearly 90 percent of the
import goods in normal trade is insured domestically, but most of the
equipment imported under loans China has obtained from abroad is insured
by insurance companies abroad. Furthermore, only a very small proportion
of the insurance related to the Chinese-foreign contractual joint ventures
and foreign-capital enterprises in China and under the project contracts
China has undertaken abroad or the labour service co-operative contracts
with foreign countries, of the insurance taken out by foreigners or
compatriots from Hong Kong and Macao coming to China's mainland for
tourist purposes, of the public liability insurance that the personnel of
foreign institutions in China are supposed to bear in China, and of the
insurance related to Chinese institutions abroad and the trade centres,
joint ventures and contractual joint ventures China has established abroad
is effected by our Company. In some cases, the insurance is even not
effected in China at all. All the above mentioned circumstances show that
China's insurance business involving foreign interests still has great
potentials and bright prospects.
Chapter III
With a view to further developing China's insurance business involving
foreign interests, it is imperative to adopt the following measures at
present:
1. It is imperative to conduct publicity drives actively, The Insurance
Company shall, with the support and help by the various departments,
people from all walks of life and the public opinion circles, employ
varied means and actively propagate the significance of developing
insurance business involving foreign interests and increasing foreign
exchange revenue from non-trade sources and of the advantages of handling
insurance business involving foreign interests to the expansion of
international economic exchanges in order to mobilize the various forces
to support the development of insurance business involving foreign
interests.
2. It is imperative to perfect the clauses related to insurance in China's
foreign economic laws and regulations. All clauses on insurance that need
to be included in the various foreign economic laws and regulations China
formulates and promulgates shall be handled in strict accordance with the
provisions in Article 3 of the Interim Regulations on the Administration
of Insurance Enterprises, which was promulgated by the State Council. It
is imperative for China to expedite the formulation and promulgation of
regulations concerning the public liability insurance that shall be
effected with respect to foreign enterprises, institutions and personnel
in China and the motor vehicle third-party liability insurance.
3. Departments for foreign affairs and departments for foreign economic
relations and trade under the governments at various levels shall give
guidance and assistance to the development of insurance business involving
foreign interests. Departments for foreign economic relations and trade
that are to call important meetings or hold talks with foreign businessmen
on major projects shall keep the Insurance Company advised of the relevant
developments and shall, if necessary, invite people from the Insurance
Company to attend such meetings or talks. In examining and approving the
feasibility study report and the draft contract with respect to a project
involving a foreign party, the inclusion of clauses on insurance shall be
one of the items for consideration. Chinese labour service units that are
contracting foreign engineering projects shall try their best to effect in
China the insurance with respect to the projects, provided this shall not
constitute a violation of the laws of the foreign governments involved. If
insurance is required for the property and personnel of Chinese embassies,
consulates and other institutions abroad, it shall be effected in China,
unless the laws of the countries or regions concerned stipulate that the
insurance shall be effected in their localities. Chinese banking
institutions based overseas shall work in close co-operation with the
Chinese insurance institutions in the localities and actively engage in
various types of insurance business.
When these banks are handling loans on mortgage, they shall try hard to
cover the insurance with the Chinese insurance institutions there with
respect to the security of the loans. The Insurance Company may, when
necessary, send their personnel to, and station them in, the corporations,
trade centres and other institutions established abroad by departments and
organizations affiliated to the Chinese Ministry for Foreign Economic
Relations and Trade to coordinate work in handling insurance business.
Chinese departments for tourism shall give active assistance to the
Insurance Company in providing the insurance required by tourists in
China.
4. The Insurance Company shall be permitted to employ economic means to
promote the development of insurance business. A considerable part of the
insurance business involving foreign interests has been canvassed through
efforts on the part of the business personnel of the departments for
foreign economic relations and trade and other departments concerned.
Take, for example, the transportation insurance for import and export
goods. Faced with the fierce competition in the international insurance
market, Chinese departments for foreign economic relations and trade and
other departments concerned, in order to increase foreign exchange revenue
from insurance business, often have to conduct strenuous negotiations and
do extra amounts of laborious work before they can succeed in obtaining
some insurance business involving foreign exchange. In order to encourage
the workers and staff of the departments for foreign economic relations
and trade and other departments concerned who actively assist the
Insurance Company in developing the insurance business involving foreign
interests so as to earn more foreign exchange revenue for the State from
non-trade sources, the Insurance Company may draw a certain proportion
(ranging from less than one percent to less than ten percent) from the
premium income as labour service fee to be paid to the aforesaid units to
be paid with CNY, which shall, on top of the common bonus, reward those
workers and staff members who have performed well in this regard. Such
rewards may be exempted from bonus tax. The Ministry of Finance shall
formulate measures in this respect and promulgate them for implementation.
5. Foreign insurance companies shall for the time being not be permitted
to begin their business operations in China.
6. The Insurance Company shall strengthen its own organization setup.
Since the Insurance Company itself separated from the People's Bank of
China last year, although there has been a relatively big increase in its
agencies and personnel, this increase still cannot meet the needs of its
business development. It is an urgent task to improve the quality of the
personnel engaged in insurance business involving foreign interests, who
shall be required to have a better knowledge of the international economy
and of China's laws and regulations governing its external economic
activities and have a fairly good command of foreign languages. Therefore,
in addition to intensifying our work to offer in-service training to our
cadres, we hope that the departments for education will provide us every
year with a certain number of university graduates who major in foreign
languages, finance or insurance, and will arrange in a planned way for
some institutions of higher learning to initiate the specialty of
insurance so as to quicken the cultivation of cadres who will specialize
in insurance business. The Insurance Company shall work hard to improve
the quality of service, increase the types of insurance coverage and
strengthen China's competitive position in insurance business.
If the above contains nothing inappropriate, it is requested that the
report be approved and transmitted to departments concerned for
implementation.
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