Changes under the WTO commitments

In November 2001, China was officially admitted as a member of the World Trade Organization (WTO). Within the package deal to conform with the General Agreement on Trade in Service (GATS), China has entered into wholesale commitments with regard to market access, national treatment, most favoured nations treatment and transparency. The restrictions over all types of insurance and related services for foreign insurance firms which include geographic scope, equity limitation and business lines will be alleviated pursuant to the specified time table. They cover life, health and retirement pension insurance, non-life insurance and reinsurance. Reinsurance is now completely open , non- life insurance can be wholly foreign owned within two years, and life insurance allows for 50 per cent foreign ownership. All geographic limitations will be phased out within three years . The following is a reverse summary translation of China's commitments under WTO from the Chinese version. (For the official wording please refer to the original English version.)

1. China will permit foreign non-life insurance firms to set up subsidiaries in China and enter into joint ventures with Chinese partners with an equity share up to 51 per cent. Within two years of WTO membership, foreign non-life insurance firms will be permitted to set up solely-owned operations in China, and the form of corporate entity will be left to the decisions of business owners .

2. Immediately upon accession , the Chinese government would cease to dictate the terms and conditions of the joint venture between foreign insurance firms and Chinese partners, and the selection of the Chinese domestic partner will be the free decision of the foreign insurance firm.

3. Foreign firms engaged in insurance and reinsurance brokerage for the carriage of goods by sea, air and land would be permitted to enter into joint ventures with domestic partners for no more than 50 per cent of the equity share immediately upon China's membership. Foreign equity participation can be increased up to 51 per cent within three years of China's WTO membership. These restrictions will be completely phased out within five years of membership.

4. Foreign insurance firms operating in China will be gradually permitted to establish sub-branches as geographic restrictions are removed.

5. Upon accession to the WTO, China would open Shanghai, Guangzhou, Dalian, Shenzhen and Foshan for foreign life and non-life insurers and brokers . Within 2 years of WTO membership, China will further open a dozen other cities. These are Beijing, Chengdu, Dalian, Chongqing, Shenzhen, Fuzhou, Suzhou, Xiamen, Ningbo, Shenyang, Wuhan and Tianjin. A year later, all geographic restrictions are to be lifted.

6. Upon accession to the WTO, China will permit foreign non-life insurance firms to offer all kinds of products and services to overseas clients and to offer property, liability and credit insurance to foreign invested enterprises (FIEs) in China. Within another two years, these restrictions will be removed and domestic Chinese enterprises will be open to foreign non-life insurers.

7. Upon accession to the WTO, foreign insurance firms are permitted to provided master policy insurance and large-scale commercial risk insurance nationwide ;

8. Upon accession to the WTO, China would permit foreign insurance firms to sell personal insurance to foreign and Chinese individual citizens , excluding groups. After another three years, they will be permitted to sell health and retirement pensions to both individuals and groups.

9. Upon accession to the WTO, foreign insurance firms would be approved to operate in China to offer reinsurance, and no geographic or quantitative restrictions will be imposed.

10. China will award licences for insurance business solely on the basis of prudence reviews, with no economic needs tests or quantitative limits on the number of licences issued provided they meet the following requirements:

    • The investor should have operated in a WTO member country for at least 30 years;

    • The investor should have had a representative office in China for at least two years;

    • The investor should have maintained US$5 billion of total assets at year-end before the application is filed (this restriction does not apply to brokerage firms);

    • Foreign brokerage firms, in order to qualify, should show total assets of US$500 million. After two years of China's WTO membership, they should have total assets of US$400 million, and two years after that, US$200 million.