China has signaled a green light for the direct investment of insurance capital in the stock market.

The China Insurance Regulatory Commission (CIRC) and China Securities Regulatory Commission on Sunday jointly issued and put into effect provisional regulations on the management of insurers' investment in the stock sector.

The regulations were approved by the State Council.

Insurers are permitted to invest directly into the stock market under "strict" supervision, the regulations said.

Before the regulations were issued, insurance funds in China were only permitted to be invested in bank deposit, public debt, financial debt, securities investment fund, corporation debt and other limited investment channels.

Under the new regulations, the investment of insurance funds can go to ordinary renminbi stocks, transferable company bonds and other investment products approved by CIRC.

The annual investment of an insurer cannot exceed 5 percent of the total assets it reports at the end of the previous year, according to the regulations.

Currently, China's insurance industry has total assets of 1.1 trillion yuan (about US$133 billion), and nearly 60 billion yuan (US$7.2 billion) from the sector is expected to enter the stock market.

By the end of August, the surplus of insurance funds in the country exceeded one trillion yuan (US$120 billion), an increase of 39 percent compared with the same time last year.

CIRC sources said the increasing surplus created a favorable environment for insurance funds to be given direct access to the stock market.

But CIRC warned that investment risks should never be neglected and must be taken into effective control for the safety of the insurance funds in the stock market.

(Xinhua News Agency October 25, 2004)