A new pilot program in China now permits insurers to invest in gold for the first time, potentially unlocking 200 billion yuan ($27.4 billion) in bullion investments. The initiative, effective since last Friday, includes top insurers like PICC Property & Casualty Co. and China Life Insurance Co., allowing them to allocate up to 1% of their assets to the precious metal.
Policy Shift Amid Economic Challenges
This policy shift reflects the authorities’ recognition of limited investment options amid a property downturn and economic slowdown. With gold prices soaring by 40% since late 2023, fueled by economic uncertainty and geopolitical risks, the new move could further drive the rally—though high prices may deter some investors.
Addressing Asset-Liability Matching
Analysts from Guotai Junan Securities highlighted that insurers face challenges in finding mid- to long-term assets with stable yields. The rising costs of liability from savings product sales have compounded these issues.
This is the first time Chinese insurers are explicitly allowed to invest in a commodity, as regulations typically restrict investments to assets offering stable cash returns. While gold offers diversification, its sensitivity to macroeconomic and geopolitical trends adds a layer of risk.