The China Insurance Regulatory Commission is likely to let mainland insurers to invest in overseas stock markets under the qualified domestic institutional investor scheme in a few months, market watchers say.
That follows a similar move by the China Banking Regulatory Commission, which allowed domestic banks to invest in overseas equities as part of government measures to absorb excess liquidity in the economy.
The insurance industry, which has been one of the biggest beneficiaries of the mainland's stock market boom, is now worth more than two trillion yuan, up about 25 per cent from last year.
'We expect more QDII moves from the China Securities Regulatory Commission and the CIRC to allow non-banking mutual funds and insurers to invest offshore,' JP Morgan chief economist Frank Gong said. 'The government has got to expand QDII greatly. When you have so much gas in the balloon, you should let it out.'
Under the QDII quota, insurance companies are limited to investing US$3.5 billion in foreign currency overseas - significantly less than the US$15 billion limit enjoyed by the banks, which operate under separate rules.
Analysts said an expanded QDII would bolster the government's means for draining excess liquidity from the economy, although the details of how the expansion would work remained unclear.