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The nation's two largest insurance firms are accelerating reforms of shareholding rights with a long-term view to float on overseas capital markets.
People's Insurance Company of China (PICC) and China Life Insurance Co have submitted reform plans to the State Council for review, said Wu Dingfu, chairman of the industry watchdog China Insurance Regulatory Commission. Wu is also a delegate to the 16th Party Congress.
If the reform plan is approved, the companies will spin off their best assets to form shareholding companies. They will then seek an overseas listing.
"Overseas flotation would fund the expansion of the insurance companies, and allow them to introduce better management," Wu said.
The bold move would follow those made by other major State-owned companies, such as oil giant PetroChina and telecom giant China Mobile. They raised billions of US dollars via their listing arms on overseas markets.
The scheme echoes the message of Party General Secretary Jiang Zemin on Friday - that the government hopes to attract more foreign investment into State-owned enterprises to push through tough reforms.
"Sources of investment must be diversified," Jiang said in his address to more than 2,000 delegates at the Party congress.
Wu refused to say when the State Council would give the go-ahead in its capacity as the top decision-making body.
But Tang Yunxiang, president of PICC, revealed the shareholding company is expected to be launched in the first half of next year.
"About 10 auditing companies are evaluating the assets of PICC... We hope to set up the shareholding company early next year," Tang told China Daily on the sidelines of the ongoing national congress of the Party.
Tang also said international insurance giants are negotiating to take stakes in the proposed spin-off company. He refused to elaborate on the topic but earlier media reports said US-based Citigroup might buy a 25 per cent stake - the maximum allowed by China's central government.
PICC sells three-fourths of the nation's property insurance, and China Life has two-thirds of the life-insurance market.
Encouraged by Jiang's call for deeper reform in the State sector, Wu promised to gradually loosen controls on insurance companies investing on stock markets in a bid to diversify their large idle funds.
Wang said this could invigorate domestic insurers that have been hindered by few investment channels.
Insurers were only allowed to buy deposits, mutual funds and treasury bonds.
The Insurance Law that was revised last month has loosened the control to a certain degree. But Wu said the liberalization process would take a long time with the government remaining alert to possible financial risks.
(China Daily November 11, 2002)
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