Chinese insurers are to invest around 70 billion yuan (US$8.75
billion) in the Ministry of Railways, the China Insurance
Regulatory Commission (CIRC) confirmed at a seminar concluded in
Beijing on June 2.
"The money will be used to upgrade the railway between Beijing
and Shanghai," said Li Kemu, vice-chairman of CIRC.
The Beijing-Shanghai Railway is the first infrastructure project
to benefit from decision to permit insurers to invest in
projects.
According to a new regulation, announced in March, insurers can
invest up to 15 percent of their total assets, but only in major
state-level infrastructure projects and in sectors such as
communications, transportation, energy, urban infrastructure and
environmental protection.
"Compared with other infrastructure projects, investing in the
Beijing-Shanghai Railway has less risks," said a staff member at
the asset management centre of a leading insurance company.
"But we are still waiting for the detailed regulation before
making any big moves."
Infrastructure investments, which are usually long-term, are
seen as attractive options for insurers, especially life insurers,
because they better match liabilities with assets.
"At a time when returns from bond markets and bank deposits are
shrinking and the stock market is volatile, investing in
infrastructure projects is a good option," said Andy Sun, deputy
manager of the investment department at General China Life
Insurance Co Ltd.
Industry statistics show that the average return for
infrastructure investments hovers at around 6.2 percent.
Statistics from the CIRC reveal Chinese insurers had about 1.68
trillion yuan (US$210 billion) in gross assets by the end of
June.
The average return on investments by insurers is expected to
rise from 3.5 percent in 2005 to 5 percent in 2006.
(China Daily July 14, 2006)