VII-8 Question: China's insurance market is still not as mature as that of developed countries. How have foreign insurance companies been developing in China? What is the future plan for the further opening of insurance market?
A: When it applied for WTO membership, China pledged to open its insurance market. China has kept that promise. Its insurance market was in fact the first financial sector opened to foreign investors, and had remained the largest sector up to December 11, 2004. Its transition period from a closed to an open market was also the shortest among all financial sectors. According to statistics, since opening to foreign investors, China's insurance market has attracted a total of 60 billion yuan of foreign investment. Up to now, 47 foreign insurance companies from 15 countries have set up 121 business operations in the China, and 135 foreign insurance companies have set up nealy 200 representative offices. In the first 10 months of 2006, with premium income of 19.12 billion yuan, foreign insurance firms accounted for 4.07 percent of the market share. The market share of foreign insurance firms in Beijing, Shanghai, Shenzhen and Guangzhou, was 18.15 percent, 18.62 percent, 10.73 percent and 9.68 percent respectively.
At present, there is not much room for further opening of China's insurance market. Foreign insurance companies enjoy a high degree of freedom except that they cannot sell third party auto insurance, nor can they sell life insurance unless they partner with Chinese firms. Foreign insurance firms cannot own more than 50 percent of any joint venture. Before these restrictions were in place, only American International Assurance Ltd. (AIA) had set up a wholly owned subsidiary. Three other foreign life insurance companies own more than 51 percent share of their joint ventures. In most of the joint venture insurance companies, ownership for Chinese firms and their foreign partners is 50 and 50 percent. This restriction is not to be removed in the near future.
China has the fastest growing emerging insurance market in the world. The insurance market has become more and more internationalized. Future initiatives to further improve the market include:
First, promote orderly competition between domestic and foreign firms to achieve common development and encourage product and service innovationto meet the needs of a diversified market.
Second, actively join in the marketization process of international service trade, engage in new rounds of bilateral and multilateral negotiations, encourage competent Chinese insurance firms to set up business operations abroad to provide insurance service to China's overseas investment companies.
Third, improve legal framework, strength supervision, enhance risk management and maintain national economic security.
It is projected that by 2010, both the scope and quantity of the insurance service are expected to improve significantly. The premium income will double that of 2005.