Chinese insurers are to invest around 70 billion yuan (US$8.75 billion) in the Ministry of Railways, the China Insurance Regulatory Commission (CIRC) confirmed in a seminar.

"The money will be used to upgrade the railway between Beijing and Shanghai," said Li Kemu, vice-chairman of CIRC.

The Beijing-Shanghai Railway is the first infrastructure project to benefit from the insurance regulator allowing insurers to invest in projects.

Under a new regulation, announced in March, insurers can invest up to 15 per cent of their total assets.

According to the rule, insurance companies can only invest in major state-level infrastructure projects and in areas such as communications, transport, energy, urban infrastructure and environmental protection projects.

"Compared with other infrastructure projects, investing in the Beijing-Shanghai Railway has less risks," said a staff member at the asset management centre of a leading insurance company.

"But we are still waiting for the detailed regulation before making any big moves."

Infrastructure investments, which are usually long-term, are seen as attractive options for insurers, especially life insurers, because they better match liabilities with assets.

"At a time when returns from bond markets and bank deposits are shrinking and the stock market is volatile, investing in infrastructure projects is a good option," said Andy Sun, deputy manager of the investment department at Generali China Life Insurance Co Ltd.

Industry statistics show that the average return for infrastructure investments hovers at around 6.2 percent.

Statistics from the CIRC reveal Chinese insurers had about 1.68 trillion yuan (US$210 billion) in gross assets by the end of June.

The average return on investments by insurers is expected to rise from 3.5 percent in 2005 to 5 percent in 2006.

(China Daily July 14, 2006)