The central government should allow insurers to buy the non-tradeable, state-owned shares of mainland-listed companies as an alternative to unloading them in the stock market, according to the chairman of newly listed PICC Property and Casualty. The proposal, however, would constitute no less than a thinly veiled state subsidy to insurers and would be at odds with the government's more urgent tasks of shoring up insolvent banks and providing social security to an army of laid-off workers and retirees, analysts said. At a seminar co-sponsored by the China Insurance Regulatory Commission last week, PICC chairman Tang Yunxiang said the government should sell the state shares at net book value to insurers. 'This would help solve the state-share disposal problem while protecting tradeable shareholder interests and avoiding wild swings in the stock market,' the chairman of China's largest property insurer was quoted by China Securities Journal as saying. As much as 68 per cent of the mainland's 4.01 trillion yuan stock market capitalisation is locked up in non-tradeable state holdings and legal-person shares. In 2001, the central government started a programme to sell state shares in all domestic stock offerings to finance the country's under-funded social security system, helping to trigger a more than 30 per cent fall in mainland share indices. The programme was shelved four months later. According to Mr Tang, the 200 billion yuan that mainland insurers have for five to 10-year investments could buy 8 per cent of the outstanding state shares. This could rise to 988 billion yuan or 38 per cent by 2007. Mainland rules force insurers to park most of their assets in bank deposits and treasury bonds; stock market investments are permitted only through mutual funds. At PICC, investment returns averaged just 2.2 per cent last year. Buying low-priced state shares, which normally trade at two to three times book value on the stock market, would be a lucrative investment for insurers. However, such a plan would raise questions about fairness. 'Everybody would want to buy state shares at net book value,' China Southern Fund Management analyst Zhang Xuesong said. It would also pit insurers against the nation's banks, which urgently need to recapitalise.