Foreign players are going to approach the China market cautiously despite recent moves by China's insurance regulator to further liberalise the sector, according to Mr Sam Radwan, president and CEO of Chicago-headquartered management consultancy Enhance International.
Commenting on AM BestTV, Mr Radwan addressed how the easing of shareholder restrictions on foreign investments by China’s insurance regulator has impacted the country.
“I think foreign players are going to approach the China market cautiously,” he said.
“There are lessons that have been learned from some of the players who entered the China market early; for example, the China market is a very difficult market to penetrate and to make a profit in. I believe the fact that there is an easing is not necessarily going to produce a lot of players knocking at the door to enter the China market.”
Mr Radwan also spoke about the merger and acquisition risks foreign investors face in China.
Distribution and profitability
He said, “In my view, the biggest challenge in China is twofold. First is distribution. Gaining access to such a vast market is a difficult endeavour. Foreign players cannot do it on their own. They need to rely on a good Chinese partner in order to be able to access distribution efficiently. Second is the lack of focus on profit and the willingness of some of the larger players to sacrifice profit for market share; consequently, making it difficult for foreign players to build a model that is profitable given the fierce competition in that space.”
However, Mr Radwan noted that foreign market participants have an opportunity for investment and growth in China’s commercial property/casualty sector.