China is expected to soon release rules allowing insurance funds to enter stock markets directly, reported an official newspaper Tuesday.

Wu Dingfu, chairman of the China Insurance Regulatory Commission, said earlier this year that it will allow insurance funds to enter the stock markets on a step-by-step basis and the investment should be stable and safe.

The regulation will permit domestic insurance companies to invest up to five percent of their assets into the stock markets, said the China Securities Journal, citing an unidentified source close to the draft rules.

The stipulation will also permit insurance businesses to purchase non-tradable shares and convertible bonds from the listed companies, said the report.

Domestic insurers cannot invest more than 10 percent of their stock portfolio into a single stock and are not permitted to purchase more than 10 percent of a stock's tradable shares, said the newspaper.

The rules will also require insurance companies to separate their stock dealing, investment and accounting departments as an effort to strengthen their internal risk control.

The report did not give a specific timetable on the announcement of the regulation, however.

Assets of domestic insurance companies totaled 912.28 billion yuan (US$109.91 billion) at the end of last year, a figure that is expected to hit 1 trillion yuan by the end of next month.

Currently, domestic insurance businesses are allowed to invest through limited channels, including buying securities investment funds, bonds and bank deposits.

Insurance companies have requested wider investment opportunities to counteract declining margins after the central bank initiated eight consecutive interest rate cut since the 1990s.

(eastday.com April 30, 2004)