Chinese Government Continues to Reduce Risks in Financial System
The Chinese insurance regulator has significantly expanded the rules, governing participation in the country's insurance market to make ownership structures more transparent. The Chinese authorities have been expanding the campaign for risk reduction in the financial system for the second year, which includes suppression of more risky investment products sold by some insurers. The rules now include 94 sub-strings, up from 37 earlier.
Under the new rules, the insurance company must have a clear and reasonable structure for participation in the share capital. Also, under the new rules, one shareholder can not control more than one-third of the charter capital of an insurance company. Investors can not entrust others to hold shareholding in an insurer. Investors should use their own legally acquired capital to acquire a stake in the insurer and can not use the holding company or transfer expected profits to circumvent the restrictions. Cash from asset management plans and trust products can be used to purchase shares of an insurance company that are subject to stringent conditions.