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Manulife to boost investment into China after foreign ownership rule changes


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Manulife to boost investment into China after foreign ownership rule changes

Manulife Financial Corp. plans to increase its investment in China, following news that the Chinese government will relax foreign ownership rules in the financial sector, according to a senior official at the company's Greater China operations.

"We want to pour more money into [China] to invest in new areas," said Michael Huddart, executive vice president and general manager for Greater China, on the sidelines of the Pacific Insurance Conference in Hong Kong on Nov. 21. "Obviously, [having] ownership guaranteed makes [investing in China] a lot more interesting for us."

Manulife holds a 51% stake in a Chinese life insurance joint venture with Sinochem Group. The joint venture, which began operations in 1996, was founded in China before the current foreign ownership regime. Current rules limit foreign shareholders to no more than 50% of a life insurer.

China's vice finance minister, Zhu Guangyao, said Nov. 10 that the country will allow foreign investors to hold up to 51% of a life insurance company in three years, before entirely lifting the cap in two additional years.

Huddart said that unlike AIA Group Ltd.'s fully owned subsidiary in China, Manulife's Chinese joint venture, Manulife-Sinochem Life Insurance Co. Ltd., is able to expand within the country under its current shareholding structure. Manulife-Sinochem Life operates in 51 cities, including Beijing and Shanghai.

"We have made significant investments in technology and [we will] grow [our current] business model faster," Huddart said. "The great security of long-term majority ownership would [make the Chinese market] even more attractive than before."

He said, however, that Manulife will not look to set up a separate company with 100% ownership, adding that "if Sinochem for their own reasons decides they want to divest a small stake, Manulife would be obviously happy to invest more."

"We are glad that China is welcoming foreign companies to invest more in that market," Huddart said. "Because we do see China as the most exciting market in the world at this point of time."

For the first nine months of the year, Manulife-Sinochem Life's total premium income was 5.12 billion yuan, taking just 0.19% of China's life insurance market, which recorded total premium income of 2.767 trillion yuan, according to China Insurance Regulatory Commission statistics. In the same period, the 28 foreign-funded life insurers in the country made up just 6.6% of the market.

Huddart said the relaxation of foreign ownership rules may help foreign-funded life insurance companies gain more market share, though he added that "we are not going to catch [Chinese companies like] Ping An Insurance (Group) Co. of China Ltd. anytime soon."

"It is a very competitive place," Huddart said. "But it is [also] a very big market, so even if it is a small market share, it is very worth having in China."

As of Nov. 21, US$1 was equivalent to 6.63 Chinese yuan.