China grants insurance licences

Foreign insurers are limited to the boom cities of Shanghai and Guangzhou

China has granted five new licences to foreign insurers including, for the first time, a Japanese life insurer.

The new licences are part of the wider market access China has accepted in exchange for membership of the World Trade Organisation, (WTO), which it joined this week after 15 years of tough negotiations.

"We're glad to be the first Japan life insurer to be given a licence in China," said Nippon Life Insurance spokesman Wu Mengfei.

Insurance licences proved one of the most controversial issues in China's WTO accession talks, sparking a row between the United States and European Union which threatened to derail the drafting of final accords.

Wrangling

Beijing agreed to allow 50% foreign ownership as part of its WTO accession.

But the US giant AIG already has wholly-owned ventures in China and was determined to retain this privilege.

To soothe European insurance firms, China granted eight new operating licences to insurers from the EU and Switzerland in September.

The latest insurers to get licences are predominantly Japanese and American: Metlife; American International Insurance; Manulife Financial; and Tokio Marine & Fire Insurance and Nippon Life.

Better terms

There are now more than 25 insurers operating in China's fast growing insurance market.

Although limited to 50% ownership of their businesses in China, foreign firms are now allowed to choose their joint venture partners freely instead of having state-run partners imposed on them.

Over the next five years, China will lift geographical restrictions which confine foreign insurers to firms to a couple of major cities, extend the types of business they can do into group insurance, health and pensions and permit wholly owned non-life subsidiaries.

Foreign financial services firms stand to benefit substantially from China's WTO entry.

Overseas stockbrokers will be allowed to set up local operations with 33% ownership.