China to let insurers invest forex in offshore debt markets

China will allow domestic insurers to invest forex in offshore debt markets, a step |hat could pave the way for loosmning of the country's tightly controlled capital account, state press reported Thursday.

The provisional rules will allow Chinese insurance companies to invest up to 80 percent of their total foreign currency holdings in offshore markets, the Xinhua news agency reported.

"It will help insurance companies broaden their investment scope, improve investment returns and better diversify investments," Xinhua cited the China Insurance Regulatory Commi-ssion (CIRC) as saying.

Chinese investors are not allowed to invest in foreign markets, frustrating large holders of foreign currency such as insurance companies, which by the end of June this year had 9.775 billion in foreign currency assets.

The long anticipated policy change grants companies the right to invest in overseas government and corporate debt, certificates of deposit and other fixed income products, the report said.

However, mainland investors are still awaiting a more far-reaching plan that would give qualified domestic institutional investors (QDIIs) the freedon to invest in Hong Kong, a clearer signal that Beijing i{ set to lift some restrictions on its capital account.

Hong Kong is also likely to be the main beneficiary of the new rules for insurers, even though there are no restrictions on investments in other markets, the report said.