HSBC Insurance may eventually raise its stake in Ping An Insurance beyond the 10 per cent it recently acquired for US$600 million, but is not planning further forays into the mainland insurance market, according to its chief executive of Asia business, Choy Chung-foo. Regulations limit total foreign investment in mainland insurers to 25 per cent, and single holdings to 10 per cent. HSBC has, therefore, bought as much as it can of the mainland's second-largest insurer, in which Goldman Sachs and Morgan Stanley also each hold 7.6 per cent. But Mr Choy said these caps could be relaxed in future and he believed foreign insurers could eventually buy stakes of up to 50 per cent. Ping An also planned to list in both Shanghai and Hong Kong in one to two years, Mr Choy said, and new share issues would dilute HSBC's holding and make room for additional investments. 'We would consider increasing our stake in Ping An either when regulations are relaxed, or when it goes public,' he said. 'However, we would also need to consider a wide range of issues such as whether we could agree on a price and whether HSBC could work well with Ping An after the 10 per cent purchase.' HSBC's stake would entitle it to two directors on the Ping An board, he said, one of whom would be new China head Dicky Yip. HSBC would provide technical assistance and could share its expertise with Ping An, which has teamed up with other local banks to sell products. HSBC's mainland branches were not permitted to sell the products under present regulations. It could also help to introduce a risk management and corporate governance culture to Ping An, Mr Choy added, and while HSBC could pass on the benefits of its international experience, Ping An could offer a strong local network. This would be a good combination to achieve strong growth in China, he said. Ping An is now China's second-largest insurer with about 20 million clients and 200,000 agents. It has a 30 per cent share of the mainland's life insurance business, second only to China Life, which commands a 65 per cent share. By comparison, all the foreign insurance companies in China have a combined share of only 1.44 per cent. Mr Choy said regulations restricted penetration by foreign companies into the insurance market. For example, a foreign firm with a single licence was limited to operating in one city while domestic insurers could operate nationwide. This geographical restriction will be lifted in five years. HSBC Insurance was late to the China market, as some insurance companies had been there for more than 10 years, Mr Choy said. 'Everybody in the insurance industry worldwide has been eyeing the China market . . . we lagged behind and the purchase [of a stake in Ping An] will help us catch up and become a leader in the market,' he said. Mr Choy said that at present each adult mainlander spent on average US$15.38 a year on insurance products, compared with US$1,000 by each adult in Hong Kong and US$2,000 by those in the United States. Premiums paid in China in 2000 amounted to US$19.2 billion, representing only 1.77 per cent of the country's gross domestic product, compared to 4.6 per cent in Hong Kong and more than 10 per cent in the US.