Insurance Business – China allows banks to invest in insurance cos

Globally, the division between banking and insurance business has often been called the Chinese wall. And now, the Chinese government knocked down this wall allowing banks to invest in insurance companies.

The move might prove to be a barrier for foreign insurance companies as they will now have to deal with banking giants like Industrial and Commercial Bank of China. The giant banks with their vast distribution network can give foreign players a serious run for their money.

Granting permission for the business marriage between two players in the financial sector, the China Banking Regulatory Commission has cautioned them against polygamy. Each bank is allowed to invest in only one insurance company. But it is silent on how much stake a bank will be allowed to take in an insurer.

The government has also announced plans to launch a series of investment funds to boost the growth of hightechnology and innovative industries, besides financing the process of industrial structuring. Each fund will be worth $37 million, the National Development Reforms Commission said. But it did not say how many funds will be created. The government will select a set of financial management companies with sufficient experience to run these funds.

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