The China Banking and Insurance Regulatory Commission ("CBIRC") recently issued the Circular on Matters Relating to the Investment of Insurance Funds in Debt-to-equity Swap Investment Plans (the "Circular").

The major contents of the Circular are as follows: (1) The basis for regulation is clarified. The investment of insurance funds in debt-to-equity swap investment plans is subject to the Circular on the Investment of Insurance Funds in the Relevant Financial Products. (2) Issuer conditions are clarified. It is stipulated that an issuer should have good corporate governance, prudent and stable operation, good law-abiding and compliance records and strong investment management capabilities. (3) The scope of investment is clarified. A debt-to-equity swap investment plan to be invested with insurance funds shall meet three conditions, including "the market-oriented debt-to-equity swap assets invested under a debt-to-equity swap investment plan shall be in principle not less than 60% of the net assets of the debt-to-equity swap investment plan". (4) Classified management is implemented in the principle of penetration. A debt-to-equity swap investment plan invested with insurance funds is subject to the investment proportion for equity assets or other financial assets according to the proportion of equity assets. (5) The regulation of concentration is tightened. A limit on investment ratio is set up, that is, 50% for a single company and aggregate 80% for a group.

(Source: www.cbirc.gov.cn)