China announced it will relax the foreign investment policy in the insurance industry by phase, allowing the foreign ownership in joint ventures to increase up to 51% in three years’ time and to fully relax to “wholly-owned” in five years’ time. In our view, this is set to be a positive news to foreign insurance players, as the enhanced flexibility facilitates them to expand the Chinese market and to be more proactive to explore the business opportunities. Among the major foreign insurance companies, we believe AIA (1299) is the key beneficiary. With its first mover position as a foreign pioneer in the development of China's insurance market, the ownership relaxation enables AIA to speed up its expansion plan into the other regions, particularly in lower cities, helping AIA to sharpen its competitive position and enhance its market share in this rapidly growing Chinese insurance market.

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