China will encourage foreign insurance companies to operate in the domestic market, according to a China Insurance Regulatory Commission (CIRC) official.

"In 2004, in line with its WTO commitments, China opened its insurance sector to foreign capital. But in the initial period foreign insurance companies have encountered difficulties," said Meng Zhaoyi, head of the international department of CRIC.

Different expectations and backgrounds meant that the foreign companies often failed to adapt their business to the Chinese context.

"China will allow foreign insurance companies to buy stakes in China-owned insurance firms so that the foreign companies can get involved in the day-to-day running of the business and deploy their management expertise," said Meng.

China will encourage foreign insurance companies to set up institutions to develop technology-intensive products such as responsibility insurance, credit insurance and agricultural insurance for western China.

The new policy will encourage foreign and domestic insurance companies to compete in terms of customers and product offerings.

By the end of 2005, foreign investors had set up 40 insurance companies with almost 400 branches in China, and held 6.92 percent of the domestic market.

Meng Zhaoyi said: "Domestic financial regulatory institutions need to be able to supervise operations in foreign-funded financial institutions to guard against risks."

Source: Xinhua