China Allows Foreign-Invested Insurance Companies to Make Capital Contributions in RMB
Aug. 14 – China’s State Council released the “Decision on Revising the Administrative Regulations on Foreign-invested Insurance Companies (Order No. 636 of the State Council, hereinafter referred to as ‘Decision’)” on June 8, which allows foreign-invested insurance companies in the country to make capital contributions by using RMB-denominated income starting from August 1, 2013. Detailed information can be found below.
Previously, foreign-invested insurance companies in China were only allowed to make capital contributions with freely-convertible currencies. However, in order to attract more foreign investment into the country’s insurance sector, the Decision has cancelled such restrictions, providing that the registered capital of a Sino-foreign equity joint venture or wholly foreign-owned insurance company can be made in either RMB or freely convertible currencies. Moreover, the Decision also permits foreign insurance companies to allocate working capital to their branches in China by using RMB-denominated income.
Under Chinese law, foreign-invested insurance companies include all of the following insurance companies:
- Insurance companies in China jointly operated by foreign insurance companies and Chinese companies or enterprises;
- Foreign-capital insurance companies which are funded and operated within China by foreign insurance companies; and
- Subsidiaries of foreign insurance companies operating within China.
In China, foreign-invested insurance companies can engage in the following two types of insurance businesses:
- Property insurance business – including property insurance, liability insurance and credit insurance; and
- Personal insurance business – including life insurance, health insurance and accidental injury insurance.
Moreover, foreign-invested insurance companies that operate life insurance businesses cannot be dissolved unless required by a division or merger. Besides, foreign-invested insurance companies are not allowed to operate property insurance businesses and personal insurance businesses concurrently.
A foreign insurance company applying to establish a foreign-invested insurance company in China shall meet the following conditions:
- It has been operating an insurance business for no less than 30 years;
- It has maintained a representative office within China for no less than two years;
- Its total assets at the end of the year prior to the submission of the application shall be no less than US$5 billion;
- The country or region where it is domiciled has a sound system of insurance supervision and administration, and it is under the effective supervision and administration by the relevant competent authorities of the country or region;
- It satisfies the solvency standards of the country or region where it is domiciled;
- The relevant competent authorities of the country or region where it is domiciled consents to its application; and
- It satisfies other prudent conditions prescribed by the China Insurance Regulatory Commission.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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