Door ajar for new domestic competition
Beijing is expected soon to approve two or three new domestic insurance companies after a three-year hiatus, according to industry sources.
China International Trust and Investment Corp (Citic), China Everbright Group and China Minsheng Bank are widely tipped as likely candidates.
Signs of such a move have come from China Insurance Regulatory Commission (CIRC) chairman Ma Yongwei.
The official told a Central Financial Work Committee meeting earlier this month that the policy was part of the CIRC's push to build up the domestic industry to take on foreign rivals ahead of the mainland's World Trade Organisation entry.
The plan also heeds growing calls on Beijing to open up the industry, not just to foreign companies but to domestic players as well, after the mainland's entry.
The number of foreign insurance companies allowed to operate in the mainland has grown to 16, surpassing domestic companies which total about 11.
Beijing last licensed domestic firms in 1996: three to operate nationwide and two on a city-by-city basis. A year previously, it gave official sanction to two regional insurance companies.
Its aim was to encourage competition in the underdeveloped market where there were only three insurance companies - People's Insurance Co of China, China Pacific Insurance and Ping An Insurance.
Industry sources believe that the CIRC could give the nod to new domestic players before the end of the year.
If successful, Citic will achieve a decade-long goal of branching into the insurance business, moving it a step closer to becoming a mainland version of US-based Citicorp.
Citic last week won regulatory approval for a landmark acquisition of a stake of about 20 per cent in Shenzhen Development Bank, the mainland's only banking stock.
Industry sources said a number of factors would come into play in the approval procedure, due to a lack of transparency in the licensing process.
A Beijing-based practitioner said: 'China is joining the WTO; it needs to open itself further in the services sector such as banking, insurance and telecommunications.' However, a Shanghai-based practitioner said the increase in numbers may not address the key issues.
'Why not make full use of the scope of existing insurance companies by relaxing the restrictions imposed on them? It is a much meaningful move,' he said.
The sensitive nature of the insurance industry - a highly protected one - has meant authorities are taking an extremely cautious approach, despite acknowledging the need for liberalisation.