A reallocation of assets in the financial services sector, aimed at reducing risk in the industry through applying the brakes on debt accumulation, may benefit insurers.
Mr Kelvin Chu, director of Asian insurance and diversified financials at UBS, predicts that insurers will have “more space” to compete with banks in the realm of long-term asset management products, reported Shanghai Daily yesterday.
Financial risk control was listed among the “three tough battles” by the top decision-makers at the Central Economic Work Conference held late last month. The other two involve the fight against poverty and pollution.
Regulators have proposed a slew of new regulations to fend off risk. In November, the People’s Bank of China drafted new rules for the asset management industry, aiming to reduce financial leveraging and arbitrage. For instance, they prohibit asset managers from promising investors a guaranteed rate of return and stipulate that financial institutions must offer yields based on the net asset value of the products they are selling.
Banks and regulators are now discussing the proposed new rules.
China's economy has steadily become more debt-ridden, reported Shanghai Daily, saying that governments, households, companies and institutions borrow money to make more money, but concern is mounting that it all may be at a tipping point.