NewChina to use insurers to close the funding gap in Silk Road projects

Procedures will be simplified for insurers to fund major projects that comply with the Belt & Road Initiative, in a move to mobilise the insurance premium that surged by a third to US$232 billion in the first quarter.

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Performers dance during the Millennial Road, a performance for the Belt and Road Forum for International Cooperation, at the National Center for the Performing Arts in Beijing on May 14. Photo: Xinhua

Published: 4:29pm, 22 May 2017Updated: 10:53pm, 22 May 2017

Chinese insurers, some of whom just had their wings clipped after a boom in wealth management products went awry, are being mobilised to pour the world’s biggest pool of premium income to help close a potential funding gap in the government’s multibillion yuan infrastructure buildup along the old Silk Road.

Starting immediately, procedures will be simplified for insurers to fund major infrastructure projects that comply with the blue print of the Belt & Road Initiative, as President Xi Jinping’s vision of infrastructure-led trade is called, according to a statement by the China Insurance Regulatory Commission.

The latest move may help close the US$26 trillion funding gap that the Asian Development Bank said is required by 2030 for infrastructure projects in Asia. Insurance premiums grew by almost a third in China to 1.6 trillion yuan (US$232 billion) in the first quarter, according to CIRC data.

Any debt investment plan in water conservancy, energy, transportation, hi-tech and advanced manufacturing from AAA-rated projects financiers can be exempted from additional collateral or third-party guarantee, an incentive which simplifies the investment procedures and makes such investments more effective, CIRC said.

China Insurance Regulatory Commission office. Photo: SCMP

The regulator will also designate special priority channels for insurers to register debt investment plans in countries and regions along the old Silk Road, CIRC said.

“The authorities are sending a clear signal for insurance to back the real economy, by offering lower thresholds in investments in major infrastructure,” said Hong Jinping, an insurance analyst at Hua Chuang Securities.