The Chinese government has revealed that it will increase foreign ownership limits in insurance companies to 51 percent in three years' time.
Full foreign ownership of insurers in China will be allowed after five years.
Vice Finance Minister Zhu Guangyao made the announcement last Friday, a day after US President Donald Trump reiterated calls for better access to Chinese markets in meetings with Chinese President Xi Jinping.
Currently, foreign holdings in insurance ventures are capped at 50 percent in general, with the exceptions of AIA, Allianz and Manulife. AIA has a 100 percent-owned subsidiary with Allianz and Manulife both having a 51 percent stake in their joint ventures.
At present, there are 57 foreign insurance companies from 16 countries operating in China. For the first half of 2017, foreign owned insurance ventures in China had a 6 percent share of the life market and a 2 percent share of nonlife business. Foreign players have said that restrictions have hindered their growth in China.
Mr Wesley Cui, General Manager at the consultancy Willis Towers Watson in China, told the South China Morning Post that a majority stake or full control could attract new foreign investors to China’s rapidly growing life insurance sector.
He said: “For joint venture life insurers, there is a prevailing headache that derives from the 50:50 stake holding structure, as no party has the decisive say, leading to unnecessary infighting, waste of resources and which hinders the implementation of strategy and operation of a joint venture life insurer.”
Mr Zhu also said that the government will relax or eliminate ownership limits in the commercial banking, securities, futures, and asset management sectors.
The cap on foreign equity stakes in securities, fund management and futures companies will be raised to 51 percent from the current 49 percent. The ceiling will be removed entirely three years after the new limit takes effect.
Mr Zhu did not mention when the 51 percent cap would be implemented. The Chinese government will also scrap the 20 percent ceiling on ownership of a Chinese commercial bank or asset management company by a single foreign investor and the 25 percent cap on total foreign ownership of such companies.
Commenting on the announcement, Mr Ken Jarrett, President of American Chamber of Commerce in Shanghai, said: “Financial services further opening definitely has been high on our list.
“It’s a step in the right direction. We’ll have to see the detailed rules. In China, you always have to pay attention to the fine print to see how quickly it moves, but to finally ease up on the cap is something that is welcome.”