The Hong Kong arm of China's largest state-owned commercial bank is entering the mainland insurance market by taking a stake in the SAR-listed subsidiary of a leading mainland insurer. ICBC Asia's investment in China Insurance International Holdings (CIIH) - a subsidiary of China Insurance - is the first time a Hong Kong arm of a mainland bank has taken a stake in a red-chip insurance company. 'It is like the ancient Chinese match-making policy. After a son and his wife get married, co-operation between both families is more convenient,' said J. M. Miao, executive director and chief executive of CIIH. Exactly how the two Hong Kong-listed companies' parents - Industrial and Commercial Bank of China (ICBC) and China Insurance - would co-operate was still being studied, said Zhu Qi, ICBC Asia's chief executive, as Beijing had placed rigid barriers between banks, insurers, securities firms and trust firms. Since 1996, banks have been forbidden from becoming involved in the insurance, stock-broking and trust services sectors. Insurance companies have been unable to take stakes in banking firms. As banks lobby for universal banking services in China, Beijing is loosening the guidelines surrounding banks and insurance companies. Mr Zhu mentioned ICBC's 30,000-plus branches and offices in China for insurance companies to sell their products through as one reason ICBC would make a good partner. ICBC Asia has acquired a 9.9 per cent stake in CIIH for about HK$474.5 million in cash. ICBC Asia will acquire 24.2 million shares, or 1.9 per cent of CIIH, from parent China Insurance HK, while the remaining 101.8 million shares, or 8 per cent, will be new shares issued by CIIH. CIIH intends to use the net proceeds of the ICBC Asia investment for long-term investment and working capital. CIIH, the only Hong Kong-listed insurance company with a Chinese origin, has also taken steps to expand into the mainland market by acquiring a 42.5 per cent interest in Tai Ping Insurance for HK$300.7 million from their parent company. 'Tai Ping Insurance will be the flagship for our general insurance business in China,' said Yang Chao, chairman of CIIH. In May, Tai Ping Insurance became the fifth Chinese insurance company to receive a licence from regulatory authorities to conduct general insurance business throughout China. Shenzhen-based Tai Ping Insurance will set up its general insurance operations by the end of this year or early next year and initially focus on motor and property insurance.