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Insurance Capital Encouraged to Invest in Major PPP Projects

Several Chinese ministries are currently actively coordinating and harmonising policies governing public-private partnership (PPP) projects, and devoting great efforts to guiding and encouraging insurance capital (or premium income) to better serve major PPP projects in the country. These ministries include the National Development and Reform Commission (NDRC), Ministry of Finance (MOF) and China Insurance Regulatory Commission (CIRC). Meanwhile, a number of insurance companies have taken the lead to test the water of serving PPP projects. According to people in the trade, it can be expected that insurance capital to the tune of trillions of yuan will be injected into China’s infrastructure sector.

China Life Investment Holding Co Ltd, as a specialised platform under the China Life Insurance banner concentrating on alternative investment and project management, is currently getting to know more about PPP projects in an attempt to invest in them. Besides, some other players such as Ping An of China Asset Management Co Ltd and the Investment Management Center of Ping An Life Insurance have also shown strong interest in financing PPP and would like to try making direct investment in PPP projects. They are eyeing super large PPP projects with a scale of over Rmb5 billion.

According to the trade, PPP mainly involves infrastructure construction, and as such, insurance capital serving PPP will mostly flow into infrastructure projects. On the international level, one of the major destinations for the allocation of insurance capital and assets is infrastructure projects. Public information shows that in the investment portfolio of large international insurance companies, asset allocation to infrastructure projects accounts for about 10% at the least and over 20% at the most. But in China, for a long time, the allocation of insurance capital to infrastructure projects has been very small. In future, efforts must be made to raise the share of investment in infrastructure projects.

NDRC and CIRC have earlier jointly issued a document encouraging insurers to invest their capital in project bonds. Experts in the field reckon that investment in the bonds and equities of major infrastructure projects can be expected to become a new investment hot spot for Chinese insurance companies.

As for the mode of investment, people in the trade generally believe that in future insurance capital will mainly be invested in PPP projects by way of PPP funds.

Content provided by Picture: HKTDC Research
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