China has launched a new program allowing insurance companies to purchase gold, unlocking billions of dollars in potential investment. This significant step is expected to further accelerate gold prices, which have already reached record levels. According to news from Bloomberg HT, ten insurance companies, including giants like PICC Property & Casualty Co. and China Life Insurance Co., are authorized to invest 1% of their assets in gold bullion.
$27.4 Billion Potential Fund
A research note published by Minsheng Securities Co. indicates that this regulation potentially represents a fund of 200 billion yuan (approximately $27.4 billion). This situation creates a significant investment opportunity for insurance companies.
Limited Investment Options in China
The limited investment options in China and the economic stagnation caused by the decline in the real estate sector have led authorities to explore new investment alternatives. In this context, gold prices have increased by 40% over the past year and a half. Additionally, the potential second term of Donald Trump in the U.S. and geopolitical risks make gold purchases even more attractive for investors. This development makes gold the first commodity explicitly allowed for investment by Chinese insurers.
Investment Restrictions
China restricts insurance funds from investing in assets that do not provide a “stable cash return” and keeps the amounts they can allocate to assets like bonds and stocks within certain limits. This new regulation presents an important opportunity for insurance companies in terms of diversifying their portfolios and managing risk.
