In a new step to further open up China's economic and financial sectors to foreign firms, the country's insurance and banking regulator has now approved what will essentially be the country's first foreign-funded pension insurance company. China's Banking and Insurance Regulatory Commission recently announced that they have approved the application of Heng An Standard Life Insurance Company Limited to establish a new wholly-owned pension insurance company in the country.
Heng An Standard Life Insurance, a joint venture company between UK's Standard Life Aberdeen PLC and China's TEDA International Holding (Group) Co., Ltd, is one of many foreign banks and insurers that have been given the go-ahead to begin preparations to establish their branches and subsidiaries in China. Additionally, China has also given the green light to increase the registered capital of foreign banks and insurers to US$1.62 billion. In the coming months, more and more foreign-funded companies should be establishing themselves in the country if the current trend continues.
According to Standard Life Aberdeen PLC, being able to establish in China will present the country with a major opportunity as it shifts away from state pension provisions. The company stated that as the country's population ages, more focus should now be given to occupational and individual savings.
The Banking and Insurance Regulatory Commission also stated that they are already planning to implement several other measures to open up the country's banking and insurance sectors to significantly improve China's business environment. However, certain regulatory requirements will still need to be met before the companies can enter the country's financial market.
The move has likely been the result of the added pressure from other countries for China to open up its financial services to overseas firms. At the recently held Boao Forum for Asia (BFA) annual conference, President Xi Jinping mentioned that China is going to be broadening access to its various markets, particularly its financial services sector. Following the event, China's Central Bank unveiled new measures that would expand access to the country's financial markets to foreign firms. The measures included the increase of foreign investors' shareholding in life insurance firms from 49 percent to 51 percent. The shareholding limit itself will apparently also be completely removed after three years.
China's insurance industry has recently become the focus of attention given that it is overwhelmingly dominated by domestic firms. As of the moment, around eight domestic insurers are dominating the pension market, which is estimated to be worth more than US$1.8 trillion by 2030.
