The mainland's insurance regulator plans to amend the rules for foreign companies investing in the booming insurance sector amid fears short-term speculation could batter the still-growing industry.
The China Insurance Regulatory Commission wants to introduce a US$2 billion minimum asset requirement for offshore investors and order them to hold their stakes for at least three years. Under new draft rules, foreign investors will also be required to have three years of top ratings from an international credit rating agency.
Analysts said the restrictions were aimed at ensuring only firms with an excellent track record invested in the country's insurers and to keep out short-term speculators focused on cashing in on the booming economy.
The three-year holding period would force investors to make serious and relatively long-term commitments to their investments, they said.
"These measures are not really tough in financial terms because most quality international insurers could easily meet them," said Hao Yansu, the dean of the Central University's finance and economics insurance school.
Metropolitan Life Insurance, the largest life insurer in the United States, has assets of US$552.6 billion while AXA's assets under management amount to US$1.73 trillion.
Mr Hao said Beijing hoped international partners could bring advanced regulatory and investment experience to mainland insurers and not just investment.
"China is not short of investment anymore but it does need expertise and good vision," he said.
MassMutual Asia chief executive Kenneth Yu Yuk-wing said the three-year lock-up period was expected to discourage investors wanting to make a quick profit.
"There have been some investment banks and private equity funds buying stakes in domestic insurance companies and then getting out months or a year later," Mr Yu said.
"Such short-term investment was useful before as many companies needed money to develop. However, that is no longer the situation."
Previous regulations covering investment in the insurance industry did not specify asset requirements or credit ratings.
Mr Yu said foreign insurers or investors who aimed to invest for the long term would be little affected by the new rules.
"Insurance companies need a long-term investment before they can make a profit so it is not a problem to invest at least three years," he said. "Other requirements, such as the US$2 billion in assets should not be a big problem as many large insurance companies could match those requirements easily."
However, a fund manager based in Britain was disappointed with the tighter rulings. "The new restrictions are likely to discourage some foreign investors," the fund manager said.
Huang Huamin, an insurance researcher with Citic Securities, said that except for the assets requirement and the three-year lock-in period, the draft rules would treat foreign and domestic investors equally.
All investors will be required to invest in cash and show excellent profit-making abilities and healthy corporate governance.
"This rule will cause more trouble for China's private investors because a considerable number of them will not be able to meet these proposed standards," Mr Huang said.
He said also certain disqualified private investors had in the past created problems for the sector.
"Some treated insurance companies as ATM machines - a place to withdraw money - and they should definitely have been kicked out", and the same would be applied to future offenders, Mr Huang said.