Challenges from WTO Membership
- Advances in Chinese Economic Studies series
Edited by Kam C. Chan, Hung-Gay Fung and Qingfeng ‘Wilson’ Liu
Chapter 7: China’s Insurance Market: Challenges and Opportunities
Hung-gay Fung, Fei Liu and Yanda Xu
Hung-gay Fung, Fei Liu and Yanda Xu THE MACROECONOMIC ENVIRONMENT Since China’s economic reform started in late 1978, it has been shifted from a centrally planned economy to a market oriented economy. China’s GDP (gross domestic product) has increased by 8.5 percent annually from 2000 to 2004 and reached a new record of US$2.26 trillion in 2005, which placed China as the fourth largest economy in the world after the US, Japan and Germany. Corresponding to the growth of the Chinese economy, the insurance premiums increased 39.6 percent annually from 1980 to 1998, a higher growth rate than the GDP growth rate over the same period.1 With respect to savings deposits, China also experiences tremendous growth. Urban disposable income per capita had a steady annual increase of 10 percent over 2000–2004. Personal deposits reached RMB14 trillion (US$1.7 trillion) at the end of 2005, an increase of more than 20 percent over the same period one year earlier. Table 7.1 shows the general economic indicators in China between 2000 and 2004. All variables including GDP growth, industrial output, retail sales and disposal income indicate rapid growth. With fast-growing wealth, Chinese consumers gradually deviate from the traditional consumption style which focuses on necessities, and begin to increase their spending on durable consumer goods such as housing and automobiles. These durable consumer goods have become popular among the rich and middle class in recent years. Consumption growth directly generates higher demand for homeowner and auto insurance. 165 166 Banking, insurance...
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