Investment in Insurance of US, Hong Kong and Mainland China

Oversea assets allocation has been mentioned a lot in recent years in China. Investors in China are looking for a better market and more choices in their investment portfolio. Why did most of Chinese investors choose American financial market? Stable economic growth and developed financial industry were the core reasons.

According the data from Trading Economics, GDP Growth Rate in the United States averaged 3.21 percent and Inflation Rate in the United States averaged 3.27 percent from 1947 until 2018. GDP Annual Growth Rate in China averaged 9.63 percent and Inflation Rate in China averaged 5.25 percent from 1989 until 2018. Chinese GDP increased incredibly fast in past 30 years and citizen accumulated enough wealth to invest. However, scruple about risks behind prosperity was built in the heart of Chinese investors. Economic bubbles and undeveloped regulation system in financial market are considered and discussed most frequently. Different from the Chinese economics, American GDP has grown stably more than 70 years. Even though Chinese GDP Growth Rate was much higher than American in past 20 years, American is still the largest economy in the world.

Other than real estate as an investment tool, insurance became more popular in Mainland. According to the data from PhoenixNet, the percentage of Mainland investors in Hongkong insurance sale was suddenly increased from 2012. The Hongkong insurance history started from 1800s and the first life insurance was sold in 1898. However, the insurance business in Mainland formally started in 1980s. Due to fully developed insurance industry in Hongkong, there are several advantages to purchase health insurance and life insurance rather than in Mainland. The confidence and trust to the insurance company in Hongkong are the psychological advantage. Otherwise, the cost to purchase an insurance from Hongkong is 30% lower than the insurance from Mainland. The average annual return from Hongkong insurance was from 5% to 9% while Mainland’s was 3%. It was an easy choice for investors. At same time, some investors in China found that purchasing insurance in American as an investment could be a better choice than doing in Hongkong. First, American insurance industry has a longer history than Hongkong and American insurance can provide similar annul return with the same cost or lower. Also, alien investors will be treated as US citizens in most situation. They can get benefit from taxation and invest without extra limitation. In China, the regulation department set up too many barriers and rules which limited the returns and insurance company cannot hedge risks in oversea markets.