Rules proposed for life-insurance Joint Ventures
( 2003-08-02 14:38) (China Daily HK Edition)
Chinese regulators laid out yesterday proposed rules for foreign ownership of life-insurance joint ventures in China, in line with its commitments upon entry to the World Trade Organisation.
Foreign companies would be allowed to hold up to a 50 per cent stake in life-insurance joint ventures but would have to have a certain minimum paid-up capital, according to proposed rules on which China is seeking feedback from the industry.
The country's insurance sector is still small but has enjoyed brisk growth in recent years, and foreign insurers are keen to tap the country's huge US$1.2 trillion in personal bank savings.
"Foreign life-insurance companies can apply to set up life insurance joint ventures with Chinese counterparts or other enterprises," the China Insurance Regulatory Commission said on its Web site at www.circ.gov.cn, describing the proposed system.
"But foreign companies must not hold more than 50 per cent of the venture's total share capital."
When China joined the WTO at the end of 2001, it pledged to allow foreign insurers "effective management control" of life insurance ventures while capping foreign stakes at 50 per cent.
Foreigners would be permitted to hold 51 per cent stakes in non-life insurance firms for two years following WTO accession, after which all ownership restrictions would be lifted.
Yesterday's rules, which interested parties have 15 days to comment on, also gave other details governing the management of foreign-invested insurance companies.
In line with regulations that came into effect in February 2002, the life-insurance rules would require foreign-funded insurers to have a minimum of 200 million yuan in paid-up capital, which foreign partners would have to pay in freely-convertible currencies.
Joint ventures set up before February 2002 that did not meet these capital requirements would have two years to do so or they would not be allowed to set up branches, enter the non-life sector, or turn themselves into wholly foreign-owned firms, the commission said.
Foreign companies applying to set up China ventures or wholly-owned firms would have to have had representative offices in the country for at least two years and each office could apply to set up only one subsidiary, it said.
One year after the establishment of China operations, foreign firms could apply to set up branches, and each new branch would be required to have an additional 20 million yuan in paid-up capital.
But companies whose paid-up capital exceeded 500 million yuan would not have to pay more to open new branches, the regulatory body said.
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