China is encouraging insurers to invest in listed companies and help cut liquidity risks connected with the pledging of firms' shares to secure loans, according to a senior official with the banking and insurance regulator.
Insurers can play a “more flexible” role in cutting share-pledge risks, said Mr Ren Chunsheng, head of the CBIRC's insurance asset management department, reported Bloomberg News citing local media reports.
The government welcomes insurance companies making financial and strategic investments in quality companies, the official newspaper China Securities Journal reported.
Share pledges, where company founders and other major investors put up stock as collateral, have emerged as a pressure point in China’s debt-laden economy, especially as the stock market tumbles.
Top regulators discussed the risks at a meeting in August, saying that further efforts are needed to ensure stability.
Regulators will also revise rules to scrap sector restrictions on insurers’ private equity investments in a bid to boost the supply of long-term capital to the economy, Mr Ren was cited as saying.
Officials are also seeking to direct more insurance funds to small businesses and key projects that support state strategies, and will encourage insurers to participate in the financial derivatives market and set up units for debt-for-equity swaps, the report cited Ren as saying, without providing details.