Insurance capital to fund China's urbanization

Insurance capital will be an important source of funding for China's ambitious urbanization drive that aims to support more people to live in urban areas, an insurance official said here on Monday.

By the end of 2015, between 6.12 trillion yuan (nearly 1 trillion U.S. dollars) and 7.14 trillion yuan, or 60 to 70 percent of the country's total insurance capital, will be used indirectly for urbanization in the forms of bonds and stocks, said Wang Zuji, vice chairman of the China Insurance Regulatory Commission.

The money will be used to construct infrastructure projects and improve social services, said Wang when elaborating a guideline issued by the commission to enhance financial support for urbanization.

China aims to raise the number of permanent urban residents to about 60 percent of the population by 2020, up from 53.7 percent in 2013.

The China Development Bank estimates 25 trillion yuan of investment will be needed over the next three years to fund urbanization.

With mounting risks regarding local government debts, the country has to look for more sources to build a sustained funding mechanism for urbanization.

Wang said the cost of insurance capital is comparatively low and the term is usually long, catering to the needs of infrastructure projects.

Insurance funds have been invested in subsidized housing projects in Shanghai, Tianjin, Wuhan, Nanjing and Chongqing, said Wang. The investment plan totalled 92.9 billion yuan.

The guideline also called for innovation in the insurance sector to make it stronger, and encouraged specialized insurance services on old-age care, health, agriculture and auto. Endi