The China Banking and Insurance Regulatory Commission (CBIRC) has granted permission to insurance companies to make Chinese stock market investment.
The move is being seen as a shot in the arm for China’s free-falling stock markets, which have been among the world’s worst performers this year, reported Caixin.
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CBIRC was quoted by the publication as saying that the permission will offer long-term, stable funding support for listed companies and will help mitigate liquidity risks related to shares pledged as collateral for loans.
A first draft of new guidelines has been issued by the CBIRC that would shed lights on how much and in what stocks insurance companies can invest.
Currently, insurers are allowed to purchase shares of fellow insurance firms, non-insurance financial companies and entities linked to the insurance sector such as health-care and auto services.
CBIRC has limited such investments at 30% of a company’s assets.
The Chinese insurance sector has reached an estimated RMB16.8trn ($2.7trn) by the end of 2017.
As per the CBIRC’s new rules, only insurance asset management firms can establish specialised investment products, provided they have not been subject to administrative penalties during the last three years.
The amounts invested in equities through the specialised products will not be subject to existing restrictions on stock investments based on insurers’ total assets and CBIRC will oversee the investment products in the same way as other financial investments.
