CIRC to Allow China’s Insurers to Invest Foreign Currency Holdings Offshore

In a widely anticipated move, the China Insurance Regulatory Commission (CIRC) has reportedly announced plans to loosen the country’s tight currency controls by allowing domestic (as well as foreign) insurers to invest up to 80 percent of their foreign currency holdings outside China.

According to the official Xinhua News Agency, as reported by Agence France Presse, the CIRC indicated the action would “help insurance companies broaden their investment scope, improve investment returns and better diversify investments.”

The regulatory agency has been considering allowing such investments for some time, and it hopes that some of the insurers’ estimated $10 billion worth of foreign currency holdings can be profitably reinvested outside China. The investments would be limited to highly rated debt instruments (government and corporate bonds, CD’s, etc.), and would not permit placing the funds in foreign equity markets.

China’s insurers are still hoping that the CIRC will lift those current restrictions, which limit investments in Hong Kong. taking such a step would allow them to participate in one of Asia’s most dynamic markets.