context: Speculation is rampant in China’s stock market, and encouraging more long-term investment is an ongoing project. As stock markets fall, regulators are actively calling long-term investors like insurance funds to increase their stock positions and prop up the market.

Xiao Yuanqi 肖远企 China Banking and Insurance Regulatory Commission (CBIRC) spokesman said on 28 Jan 2019 to Chinese Financial News, a PBoC mouthpiece, that insurance companies are encouraged to increase their positions on listed companies’ stocks and bonds. CBIRC will study the management and regulatory assessment mechanism for insurance companies’ long-term stock assets and liabilities. Filing and approval will be accelerated for compliant investment in normal and critical stocks. Property insurance management companies will also be allowed to expand the investment scope of special products to invest in the stock market through asset management plans from securities and trust companies.

Encouraging equity investments will stabilise the stock market and provide a profitable investment option for insurance funds, especially for asset-heavy insurers, says Yang Delong 杨德龙 First Seafront Fund chief economist. Introducing more long-term investors from insurance, pension, and foreign funds to the stock market is the next step, adds Yang.

The day after Xiao’s policy statement, CBIRC streamlined its insurance equity investment plan and private equity fund registration procedures. Insurance Asset Management Association of China (IAMAC) is wholly responsible for the equity investment plan and private equity fund registration. CBIRC says it will ‘enhance operational guidance’ of IAMAC to ensure smooth operation of the two products.

In the past, equity investments and private equity funds needed CBIRC approval before registration with IAMAC; removing this requirement will improve registration efficiency and encourage more long-term insurance funds to support the real economy, according to Pan Yurong 潘玉蓉 and Liu Jingyuan 刘敬元 financial reporters. However, the impact of this policy is likely to be long-term instead of short-term because insurance funds need to be managed with great prudence, according to insiders.