The growth of asset and premium income in the insurance sector moderated



In H1, the total premium income in the insurance industry amounted to RMB 2.3 trillion, representing year-on-year growth of 23 percent and a deceleration of 14.3 percentage points from the same period of the last year. Claim and benefit payments totaled RMB 578.6 billion, representing year-on-year growth of 9.9 percent. Specifically, total claim and benefit payments in the property-insurance sector increased by 6 percent year on year and those in the life-insurance sector increased by 12.7 percent.

 

Table 12 Use of Insurance Funds, End-June 2017

 

 

Outstanding balance (RMB 100 million)

As a share of total assets (%)

  End-June 2017 End-June 2016 End-June 2017 End-June 2016
Total assets 164,304 142,661 100 100
Of which: Bank deposits 21,593 23,605 13.1 16.5
Investments 123,406 102,024 75.1 71.5

Source: China Insurance Regulatory Commission

 

Growth of insurance assets moderated further. At end-June, total assets in the insurance industry posted RMB 16.4 trillion, representing year-on-year growth of 15.2 percent and a deceleration of 1.6 percentage points from Q1. Among this total, outstanding bank deposits decreased 8.5 percent year on year, whereas investment-linked assets grew by 21 percent year on year.

 

Rapid growth in foreign exchange swap deals

Foreign exchange swap (FX swap) trade continued to grow steadily. Turnover of spot RMB/foreign-exchange swaps totaled USD 2.9 trillion, an increase of 14.6 percent year on year. Turnover of RMB/foreign-exchange swap transactions totaled an equivalent of USD 5.6 trillion, an increase of 25.6 percent year on year, among which overnight RMB/USD swap transactions posted USD 3.3 trillion, accounting for 60 percent of the total swap turnover. Turnover on the RMB/foreign-exchange forward market totaled USD 40.4 billion, a decrease of 8.5 percent year on year. In H1, turnover of foreign-currency pair transactions amounted to an equivalent of USD 55.8 billion, a decrease of 18.8 percent year on year. In particular, the EUR/USD pair registered the largest trading volume, accounting for 32.4 percent of the total.

 

The number of participants on the foreign-exchange market increased further. At end-June, there were 601 members on the foreign-exchange spot market, 167 members on the foreign-exchange forward market, 167 members on the foreign-exchange swap market, 138 members on the currency-swap market, and 96 members on the foreign-exchange options market. There were 32 market-makers on the spot market and 27 market-makers on the forward and swap markets.

 

The trading volume of gold continued to grow

Gold prices rallied amid fluctuations. In H1, with weaker-than-expected tax cuts and other fiscal stimulus measures in the United States as well as a rising risk aversion caused by geopolitical events, gold prices went up amid fluctuations before they moderated in June. International gold prices peaked at USD 1,293.50 per ounce and reached a trough of USD 1,151.00 per ounce, closing at USD 1,242.25 per ounce at end-June, representing an increase of 7.17 percent from end-2016. Led by this trend, domestic gold prices also showed a similar rise and fall. The peak and trough prices of gold (AU9999) on the Shanghai Gold Exchange were RMB 300.00 per gram and RMB 258.00 per gram, respectively. At end-June, the price of gold closed at RMB 273.10 per gram, an increase of 3.49 percent from end-2016.

 

Overall, the volume of trading on the Shanghai Gold Exchange continued to grow. In H1, the total trading volume on the Shanghai Gold Exchange registered RMB 8.92 trillion, up 12.36 percent year on year. Specifically, the volume of gold trading was 24,100 tons, a decrease of 4.56 percent year on year, and the turnover posted RMB 6.66 trillion, an increase of 2.31 percent year on year. The volume of silver trading was 557,600 tons, an increase of 38.35 percent year on year, and the turnover posted RMB 2.26 trillion, an increase of 58.38 percent year on year. The volume of platinum trading was 19.87 tons, a decline of 33.37 percent year on year, and the turnover posted RMB 4.524 billion, a decline of 29.03 percent year on year.

 

II. The Development of Institutional Arrangements in Financial Markets

Measures to develop the inter-bank bond market

Bond market access between Mainland China and Hong Kong (Bond Connect) was launched in a proactive and prudent manner. TheInterim Administrative Measures for the Bond Trading Link between China and Hong Kongand other supporting documents were released. The PBC and the Hong Kong Monetary Authority reached a consensus on the principles for cross-border regulatory cooperation and other Bond Connect issues, and signed a Memorandum of Understanding on Strengthening Supervisory Cooperation under Bond Connect. On July 3, 2017, Bond Connect operations were officially launched, according to which offshore investors can participate in subscriptions on the inter-bank bond market through northbound trading, which is based on the connection of the financial infrastructure between Mainland China and Hong Kong. During the first month after the launch of Bond Connect operations, the China Development Bank, the Agricultural Development Bank, and other institutions issued bonds in the amount of RMB 51.5 billion to both domestic and overseas investors.

 

The inter-bank bond market was further opened up in a steady manner, with a view to facilitating investments by overseas institutional investors. First, the operating hours for settling bond transactions involving overseas institutional investors were extended, and T+2 settlements were made available. Second, a new English column on access by overseas institutional investors to the inter-bank bond market was added to the PBC’s website, whose content has been constantly upgraded, to provide English information to overseas institutional investors. In addition, PBC Public Notice [2017] No. 7 was released to promote eligible overseas credit-rating agencies to carry out credit-rating business on China’s inter-bank bond market, to regulate credit-rating business on the inter-bank bond market, and to promote sound and stable development of the inter-bank bond market. As of end-June, a total of 506 overseas institutional investors had entered the inter-bank bond market, including foreign central banks or monetary authorities, sovereign wealth funds, international organizations, RMB clearing banks in Hong Kong and Macao, overseas banksparticipating in RMB settlements for cross-border trade transactions, overseas insurance companies, and RMB Qualified Foreign Institutional Investors (RQFII) and Qualified Foreign Institutional Investors (QFII), with combined investments of about RMB 850 billion.

 

Moreover, the government securities market-making mechanism was officially launched in collaboration with the Ministry of Finance to improve the yield curve of government securities.

 


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