Up and coming economies in Asia - China

04 December 2018

The world has marked Asia as the region of opportunities and it is not difficult to see why.

China challenges the status quo of the USA as the leading global superpower, while India and Indonesia’s GDP growth rates have increased consistently over the past years. Malaysia’s new government is delivering an economic resurrection, giving the International Monetary Fund (IMF) reason to believe that it could become a “high-income” nation soon.

Asia is poised to compete with the developed world. To build expertise, Asian governments, as a whole, have either relaxed regulations or eased restrictions in most of its industries, especially financial sectors, to allow increased foreign investment. Even without such investments, the majority of Asian countries (apart from China) can achieve robust GDP growths with conventional technologies as they still have under-utilised resources.

The region is also characterised by increasing insurance penetration due to the increasing number of businesses and emerging segments of insurable risks. Regulatory norms in most of the Asian countries are relaxed and investor-friendly to increase insurable capacity, promote technological innovation and increase penetration.

CHINA

China

Source: AXCO

China is a strong contender to replace the USA as a superpower. It is the world’s top exporting and trading economy that is looking to improve global connections. Its pioneer Belt and Road initiative (now known as “BRI”) was built with the objective to invest trillions into infrastructure to connect China and Asia with the rest of the world. With the government easing restrictions, China saw foreign direct investment, at an all-time high, of USD 135 billion; making it the third-largest destination for foreign direct investments (FDI) after the USA and the UK. China is also ranked as second-most attractive to multinational companies after the USA (2017–2019).

Its current economic growth is driven by consumption and investment, especially in the private sector wherein urban fixed asset investment grew by 6.1%. GDP grew by 6.9% in 2017 and by 6.8% in Q1 2018. The economy is expected to grow by 6.5% in 2018 and by 6.3% in the next two years.

The Chinese government has been proactive in addressing its financial risks through its de-leveraging campaign. It is also addressing corruption through its anti-corruption campaign. Along with Hong Kong and Singapore, China has also developed 11 free trade zones for multinational corporations. Collectively, these trade zones attracted USD 16 billion in FDI in 2017 (an increase of 18.1% from 2016). The key downside risk is the high corporate indebtedness and rising trade tensions with the USA.

China is the second largest insurance market (after the USA). The overall written insurance premiums in China almost doubled from 2013 to 2017 at a compound annual growth rate (CAGR) of 18.1%. In non-life insurance, China has the second largest agriculture insurance market (after the USA) — premiums had grown eight times over the last decade to USD 42 billion in 2016. As per Ernst & Young (EY), the Chinese insurance industry is expected to grow by 16% CAGR from 2015–2020. China has also relaxed its regulatory norms for foreign investors in the insurance industry. Foreign investor ownership is 100% in the case of non-life insurance and 100% in the case of health insurance. Only recently, China issued full licenses to foreign brokers (such as JLT) to operate across all insurance businesses within the country.

For further information, please contact Graham Edwards, Regional Director of Sales and Marketing at Graham_Edwards@jltasia.com.