China’s Ministry of Finance will allocate $54 billion to state-owned insurance companies and banks. The large liquidity injection is intended to urgently bolster the capital base of the country’s financial system.
According to official statements, the country’s largest life insurer, China Life Insurance, will receive 35 billion yuan (about $5.2 billion), and China Taiping Insurance Group will get 7 billion yuan. The People’s Insurance Company of China plans to raise up to 15 billion yuan through a private placement of shares to the Ministry of Finance. Another 10 billion yuan will go to China Export & Credit Insurance Corporation, and China Reinsurance will top up its capital by 3 billion yuan.
The influx of state funds is meant to support major insurers that Beijing has previously tasked with rescuing the national stock market. With the new capital, these companies can more actively channel long-term investments into the stock market and help regulators take control of smaller, higher-risk insurers.
China’s insurance sector is currently suffering a sharp drop in profitability due to persistently low interest rates. Many regional insurers have already recorded a severe deterioration in solvency metrics. China Life’s management called the state investments a critical step that will bolster the resilience of the entire industry and allow the financial sector to continue lending to the real economy.
