With its entry into the World Trade Organisation (WTO), China's huge domestic market is opened up, and it would be a fair play with domestic life insurance companies against joint venture companies, according to Victor Apps, executive vice president and general manager for Asia of Manulife Financial.

Multinational insurance companies would be forming joint ventures with Chinese insurance companies to tap the mainland market.

Global companies were bigger with more experience and staff, but Chinese companies know China better and they already had branches over China.

"The joint venture companies have to be multinational as small companies will not be granted the licences. The rules are quite strict these days," Apps said.

China finally gained formal accession to the WTO Tuesday, kickstarting the gradual opening of different areas of the mainland economy -- including the insurance industry.

China's entry into the WTO is a tremendous event for the insurance industry because insurance is a big part of the negotiations.

"It was a big part of the U.S.-China discussions and there was obviously a blueprint for the opening up of China's insurance market," he said.

When asked whether multinational insurance companies would be athreat to mainland companies, Apps said "threat" was the wrong word.

"For Chinese companies that stay in the past, they have a big problem. But for the ones that are willing to learn and adapt, it will be fine. Chinese companies and joint ventures will both grow enormously," he said.

Manulife-Sinochem Life Insurance Co Ltd, a subsidiary of Manulife Financial, on Tuesday was approved by the Chinese Insurance Regulatory Commission (CIRC) to proceed with the preparation of a branch office in Guangzhou, southern China.

Manulife was the second foreign life insurance company to get a licence in China, after the AIA.

Manulife-Sinochem Life Insurance Co Ltd, a Sino-foreign joint venture life insurance company, began operations on November 26, 1996 in Shanghai.

Apps said the life insurance industry was still new in the Chinese mainland. Chinese life insurance was tiny 10 years ago.

Thus, quite a few people had gone in from the Hong Kong and Taiwan regions, and those people who were good at Putonghua and life insurance would have a big advantage.

At present, there were about 12 joint ventures operating in theChinese mainland. With about 3,200 agents serving more than 100,000 customers in its Shanghai office, Manulife had a 2.3 percent
market share in terms of total premium in Shanghai.

For the first nine months of 2001, Manulife-Sinochem's new business sales increased by 66 percent over the same period last year. Total premiums and deposits income grew by 87.5 percent.

The insurance industry in China will change more slowly than people imagined, but the potential is enormous for anyone in the market for a long term such as five to ten years, according to Hong Kong-based insurance brokerage firm Kwiksure.com director
Neil Raymond.

"It will take many years for China's insurance industry to change, but over five to ten years, the change will be significant. If companies have the resources to take the opportunity, it will be huge," he said.

Raymond said, in the short term, Chinese insurance companies were going to suffer badly with the entry of foreign competitors. However, in the long term, if Chinese insurance companies were to be successful, they had to develop.

The best way is to be exposed to real competition where the standards and benchmarks are raised. People would come to expect more and that would force companies to develop and evolve, he said.

However, one could not just take Hong Kong's insurance products over the border and sell them. In many ways, going across the border to the Chinese, unlike selling CDs, is a big issue.

Most global insurance companies would consider China as the biggest opportunity in the industry for the next 30 to 40 years.

Raymond said a large proportion of companies in Hong Kong are global insurance companies with their bases in Hong Kong. They would leverage their Hong Kong operations to enter China's mainland.

Most of them use the expertise here to gain the entry to mainland. People hoped that after the entry into the WTO, the entry system would become much easier, quicker and more transparent.

Consequently, hundreds of insurance companies are lining up to get licences to get into China, Raymond said.

Raymond also said the WTO admission would not have a big effect on individual brokers. However, the senior managers in insurance companies and their global bosses were working very hard to work out how they could get into China as quickly as possible to get
hold of the opportunity.

Raymond said Hong Kong companies had more advantages than insurance companies in the Chinese mainland. They were well-positioned, with good product understanding, good marketing expertise, phenomenally deep financial pockets to fund expansion, and good access to capital markets around the world to offer financially stable products.

As these companies, double or triple-A-rated, had been around for hundreds of years, clients have a good chance of getting the money when they reached retirement.

The market size of the insurance industry in China stood at 15 billion U.S. dollars last year. Raymond said global insurance companies such as the AIA, AIG, would be looking for 50 years in the Chinese market, not two or five years.