Speaking at the Third Beijing-Tianjin Insurance Forum, which ended on June 2, Wu Dingfu, chairman of the China Insurance Regulatory Commission said that the Ministry of Railway had agreed to raise between 50-80 billion yuan (US$6-10 billion) from targeted insurance companies as preliminary funding for investment in the Beijing-Shanghai Express Railway project.
The project has been approved by the central government and construction will start soon with completion scheduled for 2010. The total investment will reach 130 billion yuan (US$16.23 billion).
China published a regulation in March which permits insurers to invest in infrastructure projects including transport, communications, energy and environmental protection. So using this approach will result in almost half of the railway funding coming from the insurance industry.
However, rules stipulate that the companies can invest no more than 5 percent of their total assets in public projects and this is designed to ensure that no great risks are taken. This means the railway ministry can raise a maximum of 80 billion yuan from insurers.
"Whether to invest in the project or not requires to be based on an evaluation of all the risks," an insurance insider observed. "The project involves a substantial investment, a long construction period and low returns."
A spokesman of Ping An Insurance (Group) Co, which is reportedly investing 12 billion yuan in the project, said that the deal couldn't be finalized until a more concrete plan is unfolded.
(China.org.cn by Wu Nanlan, June 15, 2006)