20 Pages

China’s Entry to the WTO: Prospects and Managerial Implications for Foreign Life Insurance Companies

Despite the strong growth of life insurance premiums since late 1978 when the economic reform programme began in the People’s Republic of China (PRC),1 Chinese life insurance firms have been noted for their low efficiency in operation. In the absence of an open and competitive market, the predominately state-owned domestic firms have monopolized the insurance market. The introduction of foreign life insurance companies is therefore perceived as a policy response to enhance the competitiveness of the market through the transfer of foreign capital, expertise and knowledge in products, risk and investment management. However, in a bid to protect domestic life insurers, operations of foreign life insurers have been confined to selling individual policies denominated in domestic currency (Renminbi, Rmb) in a few cities, along with the restriction on ownership. Now that China has been formally accepted as a full member of the World Trade Organization (WTO) on 10 November 2001, it is expected that more foreign insurers will be attracted to the Chinese market, amid the ensuing liberalization in its insurance sector.2