Mainland insurers compete with foreign players in banking sector
China's insurance firms, long confined to low-yield investments, have begun aggressively expanding their business scope since new rules allow them investing in banks and infrastructure projects, The Wall Street Journal reported.
The decision has put local insurers in competition with foreign investors for Chinese assets, potentially raising prices for bank stakes as the number of attractive targets dwindles. The insurers' moves also take China a step closer to an integrated financial-services sector.
"Insurance companies want to play more of a role in the financial sector," and top insurers have the money to bid for banks, says the paper, quoted May Yan at Moody's Investors Service in Hong Kong, as saying. She says prices have been rising for Chinese bank shares as more foreign investors and large insurers hunt for stakes.
Chinese insurers have an advantage over foreign players in the hunt for local assets because domestic investors aren't limited on the size of their investment in banks. A single foreign investor can take only a 20% stake in a domestic bank, and total foreign investment can't surpass 25%.
However, Chinese insurers also lack experience in banking, which means those institutions that put a premium on expertise are likely to be attracted to foreign investors.