During the first half of this year, GuangDong province (not including ShenZhen) insurance income amounts to 41.58 billion yuan and its high growth is drawing attention from the industry.
Recently, 中央财经大学保险学院执行院长 professor 郝演苏 went for some research and investigations in GuangDong and estimates that hot money of about 10 billion yuan has entered into the GuangDong insurance market. GuangDong's 保监局 quickly responded that there are no hot money inflow and says that the insurance products does not have the conditions to attract hot money.
In the first half this year, GuangDong's insurance income's 92.63% growth is well above the national average value of 63.94%, in it 75% and above comes from bank insurance sales. In the first half of this year, JiangShu, ShangHai, BeiJing and other frontline provinces and cities growth is lower then the national average. Professor 郝演苏 questions that with the implementation of the new labour law, the Pearl River delta region industries have not been doing well, so where does the large amount of money comes from? GuangDong's population are more financial savvy comparatively and who will invest in such prudent insurance products?
GuangDong's 保监局 says that other than the capital market downturn causing funds to flow towards the insurance market, insurance and banking industry's attention towards insurance products is the main cause for the high growth. In the past year there have been 8 new provincial-level insurance branches opening in GuangDong, about half that of the 17 currently in GuangDong. The business development is the driving force for the growth in insurance premiums in the first 8 months of this year.
Professor 郝演苏 thoughts is that in the first half of this year, GuangDong's insurance growth of 92.6% amounting to insurance premiums of 20 billion yuan, with fronline areas average growth of about 50% as an estimate, of the 20 billion yuan, 10 billion yuan comes from overseas.
Professor 郝演苏 says that from his research, because the Hong Kong dollar is pegged to the US dollar, to prevent depreciation of the Hong Kong dollar and to earn a higher interest, quite a lot of Hong Kong and Macau people are putting their funds in bank insurance products with prices quoted using the Chinese RenMinBi. The most welcomed product is 万能险 because it is capital guarenteed, has higher returns and relatively easy to buy and redeem.
However, GuangDong's 保监局 does not agree to that idea. It says that from an earnings/returns perspective, Hong Kong's investment based insurance products' quality are much better than those in China quoting a example that an insurance company in GuangDong and Hong Kong selling the same type of 万能险 insurance product, tracking over a period of time, the returns in Hong Kong is about 5% whereas in China it is only about 3%.
中山大学金融学博导 professor 申曙光 also questions that hot money's characteristic is to get high returns in a short priod of time. Investing in insurance products cannot match this characteristic. There are a lot of ways hot money can get into China, but with the various adminstrative fees to pay for insurance products in China, the possibility of high gains in a short period of time is relatively low.
People from the GuangDong's insurance industry have cold response to this news. Saying that in Hong Kong, the stock and housing market is not doing very well coupled with the depreciation of the US dollar, if Hong Kong and Macau people were to buy insurance products quoted in RenMinBi with higher constant returns than bank's fixed deposit coupled with the appreciation of the RenMinBi, it will be a better investment option.
An insurance company's banking insurance product manager said that the largest client they have has an insurance premium of 20 million yuan per person. They also have clients from Taiwan. They are very willing to sell as it does not violate any Chinese government's regulations. He said that other then the recent instructions from the Chinese government regulators to reform the banking insurance products due to the fear that it may grow too fast causing a negative growth next year, there are nothing much of other instructions.
Professor 郝演苏 says that 10 billion yuan in GuangDong or China is not a big sum. There is no need to fear once the term hot money is being heard and think negatively. He says his report is just serving a warning bell to the Chinese regulators. Firstly, are there more conrete regulations to govern foreigners buying insurance products in China? Next, for big insurance premiums, are there any checks in place to trace the source of the fund?
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