China Insurance Regulatory Commission (CIRC) Sunday promulgated the detailed rules on overseas investment of the foreign exchange capital by the country's insurance companies.
Under the rules, Chinese insurance companies will be allowed to, as of Sunday, invest up to 10 percent of the foreign exchange quotas approved by the State Administration of Foreign Exchange in shares of Chinese companies listed on the stock markets in New York, London, Frankfort, Tokyo, Singapore and Hong Kong.
An insurance firm is allowed to invest a maximum of five percent of its foreign exchange quota in a single share, according to the rules.
The regulations also list structural deposits, mortgage-backed securities (MBS) and money market funds as part of the mature investment products that Chinese insurance firms are allowed to invest in.
The rules, officially known as detailed rules of the provisions on the overseas use of foreign exchange capital of insurance firms, was formulated by CIRC in cooperation with the State Administration of Foreign Exchange.
China made public the provisions last year in a bid to lift bans on overseas investment of the foreign exchange capital of the country's insurance companies.
The country's foreign exchange capital owned by China's insurance firms exceeded 10 billion US dollars, mostly from the overseas public offering by China Life Insurance Co., Ping An Insurance Co., and PICC Property and Casualty Co.
Yang Chao, board chairman of China Life Insurance Co., said his company will start overseas investment very soon and is awaiting the approval of its application by the regulator to invest in overseas H-share market, or shares of Chinese firms listed overseas.
Experts said the rules were designed to help those firms to capitalize on overseas capital market so as to maintain and
increase the value of their assets and prevent financial losses due to possible fluctuation of the exchange rate of the Chinese currency.
With 3.1 billion US dollar foreign exchange capital, China Life Insurance Co. suffered 500 million yuan (61 million US dollars) in financial losses due to the appreciation of the Chinese currency in July.
China scrapped the currency's peg to US dollar when it announced the decision on July 21 to reform its currency exchange mechanism, allowing the exchange rate of its currency against the US dollar to float within a band of 0.3 percent.
On Aug. 10, Zhou Xiaochuan, governor of China's central bank, the People's Bank of China (PBC), announced in
Shanghai that the basket of the US dollar, euro, Japanese Yen and the won of the Republic of Korea would constitute the basket of currencies acting as a reference in determining the value of its currency.
