On Thursday 5 September, the China Insurance Regulatory Commission opened the door for the 4.57 trillion yuan (516.6 billion; $672 billion) Chinese insurance sector to include real estate and certain other new sectors among its investments. The event is widely regarded as one of the most important for Chinese real estate investment this year.
Below PERE lists the points from the new rules most significant to private equity real estate firms at the time of writing.
CIRC’s new rules: key points
– Chinese insurance companies may have up to 10 percent of their assets invested in real estate. Analysts have suggested this could introduce up to $100 billion of new equity capital into the market.
– Investments by insurance companies into real estate related financial products can account for no more than 3 percent of insurance companies’ total assets. It is not clear at this stage whether this includes private equity real estate funds or not. The CIRC has stipulated that investments in private equity funds must not exceed 4 percent. Again, it has not be specified whether this includes private equity real estate funds.
– Direct investments in Chinese residential assets have been prohibited. Some private equity real estate managers have called for clarification on whether insurance companies can invest in residential assets through a private equity real estate fund.
– Direct investments by Chinese insurance companies in real estate development are also prohibited. Again, whether such investment can be done via a fund remains unclear.
– Direct investments by Chinese insurance companies into real estate for their own use are also prohibited.
Chinese insurance companies are also prohibited from forming their own real estate companies or investing in private real estate companies.
– All investments in the private real estate market must by approved by the CIRC and the National Development and Reform Commission.
– There are still numerous implementation rules to be formulated by the CIRC, the timescale for the delivery, has not been announced.