Two European insurance giants are moving towards having wholly-owned companies in China, marking a big step in the opening-up of the country's financial sector that experts say could send a positive signal amid tense US trade talks.

German heavyweight Allianz on Sunday got the go-ahead from the Chinese regulator to launch the first holding with 100 percent foreign capital.

The following day, French company Axa announced it plans to take full control of its Axa Tianping damage insurance joint venture, a move which would make it the first foreign insurer to own a company ranked in the top 20 in China for (non-life) general insurance.

"What's interesting is that both are taking 100 percent and that it is happening sooner than expected," said Professor Marie-Francoise Renard, head of China's Institute for Economic Research at the Centre of Studies and Research in International Development (Cerdi).

For the Allianz venture, China bypassed its own schedule of gradual opening of the financial sector.

Central bank governor Yi Gang in April announced that within "a few months" foreign companies could control up to 51 percent (instead of 49 percent) of joint ventures for brokerage, asset management, futures trading or life insurance, and that cap would be eliminated "within three years".

But President Xi Jinping has stressed his wish to open up to foreign companies, and that groundbreaking measures would be announced before the end of 2018.

- 'Win-win' -

The pledge is "most likely connected to the China-US trade war and the G20" in Argentina this weekend, according to Hu Xingdou, professor of economics at Beijing Institute of Technology, and China will be "hoping to reach a win-win agreement with the United States".

"It's certainly not a coincidence that it is being done now," added Renard. "In general, the opening up in China is progressive."

China has multiple objectives, she said: not only is it about "gaining international credibility" but also "importing international methods and standards, as well as more sophisticated products".

"At the same time as it wants to internationalise its currency, China wants to move upwards in the financial sector, improve the quality of its products and adopt better practices. And in finance, it needs international standards," she said.

For Allianz it is "a turning point", and an opportunity to develop in a "strategic" and blossoming market.

- High demand, low penetration -

The need for insurance in China remains high due to the rise of a middle class demanding more protection as well as an ageing population.

The penetration rate of insurance, however, is still low.

Insurers' assets grew by 11 percent in 2017 after a 23 percent jump in 2016, according to the French Treasury.

But will foreign companies -- whose market share reached only 5.16 percent by the end of 2016 -- really be able to muscle their way into the sector dominated by a handful of local giants?

"I do not think it will be very difficult because foreigners have their strengths", said Hu, adding their wide range of domestic or agricultural insurance products could plug gaps in China.

There have been some damaging scandals in the sector recently, and Hu said the foreign operators could "inspire confidence in many Chinese people".

Numbering 40 in 2005, joint ventures between China and foreign companies increased to 57 in 2016 for damage and life insurance.

Some 26 of the 59 largest insurers in the world have not yet ventured into China, economist Wang Yi from PICC Asset Management wrote in the Eurasian Journal of Economics and Finance.

And of the 500 largest global insurers, only six are purely Chinese, he said.

jg/bar/evs/je/amz

ALLIANZ

AXA

PICC PROPERTY & CASUALTY

Related Links
Bringing Order To A World Of Disasters
A world of storm and tempest
When the Earth Quakes

Tweet

Thanks for being here; We need your help. The SpaceDaily news network continues to grow but revenues have never been harder to maintain. With the rise of Ad Blockers, and Facebook - our traditional revenue sources via quality network advertising continues to decline. And unlike so many other news sites, we don't have a paywall - with those annoying usernames and passwords. Our news coverage takes time and effort to publish 365 days a year. If you find our news sites informative and useful then please consider becoming a regular supporter or for now make a one off contribution.
SpaceDaily Contributor $5 Billed Once credit card or paypal		SpaceDaily Monthly Supporter $5 Billed Monthly paypal only

Navy participates in humanitarian, law enforcement exercise with Peru, Chile
Washington (UPI) Nov 26, 2018
The amphibious transport dock USS Somerset and the destroyer USS Wayne E. Meyer will conduct exercises in Ecuador, Peru and Chile as part of U.S. Southern Command's Enduring Promise Initiative. Three hundred Marines and sailors from the Special Purpose Marine Air-Ground Task Force-Peru aboard the Somerset will train in humanitarian assistance and disaster relief with forces from the Peruvian navy, the U.S. Navy announced on Monday. Wayne E. Meyer will conduct exercises with the navy of E ... read more