(Yicai) Jan. 23 -- China is increasing the scale of long-term insurance funds flowing into the nation’s sluggish stock market, with a senior financial regulator stating that CNY50 billion (USD6.9 billion) will be approved to enter the market before the upcoming Lunar New Year break.

The second tranche of a pilot program to get insurers to invest in Chinese mainland-listed stocks will be CNY100 billion (USD13.7 billion), with half given the go-ahead before the holiday, Xiao Yuanqi, deputy director of the National Financial Regulatory Administration, said at a press conference today.

The annual holiday, known as the Spring Festival in China, starts on Jan. 28 this year.

The pilot program was launched in October 2023 when the NFRA approved China Life Insurance and New China Life Insurance to raise CNY50 billion for a new private equity fund making long-term investments in yuan-denominated stocks. That all ran smoothly -- balancing efficiency, security, and liquidity -- and with considerable benefits, Xiao pointed out.

Looking ahead, the NFRA plans to swell the ranks of participants and the scale of funds based on the willingness of insurers, which can apply individually or collectively. The watchdog will also optimize the investment policy of funds, encourage a steady increase in stock investments, and aim to have insurers allocate 30 percent of new premiums to equities.

Insurance funds are a major source of stable, long-term investment capital, given their need to match liabilities such as life insurance payouts with long-term returns. The government is guiding them into equities in an effort to bolster a lackluster stock market.

Several government departments recently issued a plan, involving commercial insurance funds, the National Social Security Fund, and the Basic Pension Insurance Fund, to promote medium- and long-term funds to enter the stock market.

Insurance funds have invested more than CNY4.4 trillion (USD604.1 billion) in equity funds, accounting for 12 percent of their total investments, Xiao said. When the equity of unlisted companies is included, that rises to 21 percent, highlighting the advantages of insurance funds as long-term capital, he noted.

Xiao also provided an update on the country’s real estate financing coordination mechanism, a so-called white list of real estate projects and property developers eligible for financial support that was launched early last year. The effect has been remarkable, he said. 

As of year-end, commercial banks had lent more than CNY5 trillion based on the white list, surpassing the targeted CNY4 trillion, Xiao said, adding that the figure had risen by CNY570 billion to almost CNY5.6 trillion as of yesterday.

The program provides sufficient and stable financial support for the completion and delivery of real estate projects, and will continue to play a role in guiding financial institutions to stabilize financing for the real estate industry, Xiao added.

Editor: Emmi Laine