Insurance Funds Can Be Invested

According to the new Insurance Law of the People’s Republic of China, insurance funds can be invested in real estate industry from 1st October, 2009.

In the past, the use of insurance funds in China is restricted only to bank deposit, trading of government bonds and financial bonds and other forms of fund utilization stipulated by the State Council. However, since the last century 90's, a large number of insurance companies have begun to purchase their own property used for commercial rental and a large number of insurance funds have been used to buy shares of some real estate companies. Actually, the insurance companies have already got involved in the real estate industry. Now the changes of law make these conditions legalized.

Though it makes the area of the investment of insurance funds broader, there are also some problems requiring the attention before the government releases the "insurance company real estate investment management approach Pilot".

Lehman lawyer HaoJunbo remarks that there should be also some restrictions on the use of insurance funds invested in real estate industry. For example, according to "management approach (discussion paper)", insurance companies can invest in real estate just through the purchase of property, shares the project company, asset-backed debt investments, and real estate-related financial products. Furthermore, the proportion of the investment in real estate industry should be within reasonable limits. Both the safety and the efficiency should be considered by the government.