China has for the first time givendomestic insurers a go-ahead to invest their foreign exchange assets in overseas financial market under strict supervision, according to a new regulation issued by the country's financial authorities.

The new regulation, jointly issued by the People's Bank of China, or the central bank, and the State Insurance Regulatory Commission (SIRC) recently and announced Wednesday, allows qualified Chinese insurers to invest mainly in bonds on overseas markets, while giving top priority to asset safety.

The move is expected to have a far-reaching significance in widening the channel for the insurance industry to operate their funds, warding off risks and improving investment returns, an SIRCofficial said.

According to the insurance watchdog, the Chinese insurance industry had hold in hand foreign exchange totaling 9.775 billion US dollars by the end of June. The major source of the forex includes the capital fund and operating funds of foreign-invested and joint-venture insurance companies, the foreign shares of Chinese insurance companies, the accumulated forex assets in insurance companies' foreign currency business, and the funds collected by three Chinese insurance companies from the overseas listing.

Due to a lack forex investment tools in the domestic market, the majority of the foreign exchange assets of Chinese insurers have been put in domestic banks as deposits. As a result of the falling interest rate of forex savings, the profit of domestic insurance companies in terms of forex-denominated assets has kept dropping over the last few years.

According to the official, the new regulation will also help Chinese insurance companies to participate in international competition, balance the nation's international payment, and alleviate the growing pressure on the exchange rate of the Chinesecurrency.

China's foreign exchange reserves rose to 470.6 billion US dollars at the end of June, 67.3 billion more than at the beginning of this year.

Source: Xinhua