Purchasing Business Insurance in China

There are all forms of risk when doing business in a foreign land such as China. To encourage foreign investment, the Chinese government does have establishments in China to offer ‘insurance’ on such ventures. There are also American enterprises that offer insurance when doing business in China.

The American offered insurance when doing business in China comes from the Export-Import Bank of the United States (Exim). The “…insurance program can be used to insure payment under unconfirmed letters of credit” (http://www.export.gov/china/exporting_to_china/GettingPaidforExportsChinaNov2009.pdf). This will protect the investor from the risk associated with the foreign bank.

China insurance for foreign investments has only been around the last decade. Insurance was established in China since 2001, “In compliance with the international practice on trade and investment promotion” (http://www.pri-center.com/documents/south_south/china07.pdf). The first insurance provider established by the rule was Sinosure. They’re major point of promoting foreign financing was “inbound investment insurance” http://www.pri-center.com/documents/south_south/china07.pdf.

One can also purchase insurance from within China. These policies can be purchased from any, “…agencies, brokerages, loss-adjusting companies and their branches” (http://www.circ.gov.cn/web/site45/tab2727/i38817.htm), that are approved by the China Insurance Regulatory Commission (“CIRC”). The CIRC regulates ALL insurances offered. It must “…examines and approves the establishment of insurance intermediaries” for them to be legal within China. This includes foreign insurances.

Apart from covering of foreign letters of credit, there is also insurance for covering equity in an investment. There are, however, more rules for such insurance under the ‘Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures’. Article9 states that “…The various kinds of insurance coverage of an equity joint venture shall be furnished by insurance companies established within the territory of China” (http://www.npc.gov.cn/englishnpc/Law/2007-12/13/content_1384083.htm).

The establishment of insurance in China is an added incentive to invest into the Chinese market. While not all risk can be insured, and the purchasing is an extra cost, it does allow one to invest with much more security into a new market.

By – Domenic Gabriella for ChinaExports.com


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