Cablegate: Progress in the Jcct Insurance Dialogue

VZCZCXRO6694
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #2791 2720842
ZNR UUUUU ZZH
P 290842Z SEP 09
FM AMEMBASSY BEIJING
TO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 6274
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS BEIJING 002791

SIPDIS

STATE PLEASE PASS USTR FOR STRATFORD, MAIN

E.O. 12958: N/A
TAGS: ECON CH
SUBJECT: PROGRESS IN THE JCCT INSURANCE DIALOGUE

1. (U) Summary. China will act on a USG request to amend its
administrative regulations of the insurance industry to
distinguish between serious and minor violations to avoid
overly-penalizing minor transgressions, a senior China
Insurance Regulatory Commission (CIRC) official told visiting
Assistant USTR. The Ministry will not, however, agree to two
other long-standing US "asks" to lift restrictions on third
party auto liability insurance and on asset management at
this time, he said. CIRC is interested in convening a
meeting between US and Chinese experts to discuss financial
market regulation and other topics relevant to the insurance
industry. End Summary.

2. (U) China will amend its administrative regulations of the
insurance industry to differentiate between serious and minor
violations such that minor violations will not be subject to
the two year ban on opening new branch offices China
Insurance Regulatory Commission (CIRC) Vice Chairman Li Kemu
told Assistant US Trade Representative Tim Stratford
September 24. Li noted this issue had been raised by the US
during the Joint Commission on Commerce and Trade (JCCT)
Insurance Dialogue in September in Dalian. He said China
hopes to publish the revision to the law before the October
28 JCCT summit in Hangzhou and that the change could be
highlighted as a positive outcome of the talks.

"No" to Third Party Insurance Participation
-------------------------------------------

3. (U) Asked again about the possibility of opening up its
third party auto liability insurance market to foreign
company participation, Li stated CIRC is "actively studying"
the issue. (Note: This has been a long-standing US "ask." End
Note). AUSTR Stratford suggested CIRC could launch a pilot
project to test the proposition before opening the entire
market to foreign participation. Li agreed, saying that when
CIRC decides to move forward on this issue, the Ministry
would consider establishing a pilot zone.

4. (U) Li said the CIRC will not agree to lift insurance
companies' 30 percent cap on investment in corporate bonds.
He admitted both Chinese and American insurance companies
would like to have the cap lifted, but, given the relatively
immature state of the industry in China and the global
financial crisis, the Ministry believes the limits are
necessary. Li suggested, in the future, the CIRC might make
a distinction between "capable" and "incapable" companies,
allowing the former more discretion in asset management
decisions.

"Yes" to Exchanging Information
-------------------------------

5. (U) The CIRC's international department has formed a study
group to analyze international practices in financial market
regulation, Li explained. The group is particularly
interested in how these practices are evolving given the
financial crisis and has three focus areas for the study -
macro-prudential supervision, regulating financial innovation
and countercyclical financial measures. Li said this group
could meet with US experts to discuss asset management
regulations and other topics of mutual interest.

6. (U) AUSTR Stratford asked about the status of Liberty
Mutual's "preparation of branch" application. (Note: To allow
the company to open an additional branch. End Note). Li
replied CIRC is reviewing the application and that a
"positive answer" would be forthcoming.
HUNTSMAN

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