China is thinking about granting foreign insurance companies the right to directly establish local businesses to help lift overall standards within the sector and increase the share of national assets owned by foreign firms.

It is one of a dozen potential measures outlined in a statement posted on the China Banking and Insurance Regulatory Commission (CBIRC) website on Wednesday, that the regulator said it plans to launch soon, without giving a specific timeline.

Further opening up the banking and insurance sectors would help to meet the changing economic and financial needs of China by lifting competitiveness and enabling firms to learn from more advanced international ideas and experience, Guo Shuqin, chairman of the CBIRC, said in the statement.

Foreign bank and insurer assets in China account for 1.64% and 6.36% of total assets, respectively, according to the CBIRC release. 

But these proportions are bound to go higher once the rules are relaxed, a Shanghai-based chief investment officer of a joint venture insurer, told AsianInvestor

Previously, big overseas firms with subsidiaries in life insurance, property insurance or asset management could only set foot in China by first operating as a joint venture.

A lot of foreign firms will definitely set up entities in China once the rules are changed. Overall it's a very welcome step, Sandra Lu, partner of Shanghai-based legal advisory firm Llinks, told AsianInvestor. 

That includes the foreign insurance firms that already have joint ventures in China and who may as a result prefer to go it alone rather than raise their stakes, according to Benjamin Deng, group chief investment officer of China Pacific Insurance Group.

“Foreign companies would probably set up new businesses in China rather than fixing the existing joint ventures,” he told AsianInvestor. “It would be easier and cleaner to start afresh.”

Previously, foreign insurers could only enter the Chinese market as joint ventures and own up to 49% of the units. Things started to change in late 2017 when China first announced the relaxation of ownership limits (up to 51%) for foreign firms in the wake of US President Donald Trump’s visit to China. After subsequent change in rules, foreign firms can now wholly own these joint ventures.

OPENING UP

Guo also reiterated Chinese President Xi Jinping’s pledge to open up the financial sector in the latest release, signalling more potential opportunities for foreign players in China.

President Xi has repeatedly stressed that efforts to open up the financial as well as other sectors should be launched “sooner than later”, Guo said, and that the country's financial watchdogs have been taking things forward.

In March this year, Standard Life Aberdeen became the first foreign insurer allowed to set up a new unit to tap the pensions market in China. Heng An Standard Life (HASL), a joint venture equally owned by Standard Life Aberdeen and Tianjin Teda International, obtained official approval to set up a pensions insurance subsidiary in China.

In December last year, French insurer Axa obtained approval to become the first foreign insurer to fully own an insurance company and subsequently became sole owner of its joint venture, Tianping Property and Casualty Insurance. 

A  month before that, Germany's Allianz won approval to set up the first wholly foreign-owned insurance holding company in China.