Page 318 - 2017 White Paper
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7 White Paper on the Business Environment in China
insurance for property, environmental liability insurance schools) and special training institutions (such as military,
and agricultural insurance (Xinhua 2016b). police, political, and Chinese Communist Party schools)
are still considered prohibited areas, foreign investors are
China’s insurance regulator is tightening its control allowed to invest in pre-school educational institutions,
over short and mid-term life insurance products, in a bid high schools, and tertiary educational institutions
to curb potential risks from aggressive insurers investing in the form of Sino-foreign joint ventures, in which
heavily in stocks and long-term assets using short-term foreign majority ownership is allowed but only when
funds. The China Insurance Regulatory Commission the Chinese party is in a leading position. In contrast to
(CIRC) is reducing the industry total premiums from such these restrictions, foreign investors are encouraged to
products to between 500 billion yuan ($77.3 billion) and invest in sports training and non-academic vocational
550 billion yuan a year, from 650 billion yuan in 2015, said training institutes (such as IT, accounting, English, etc.),
Yuan Xucheng, director of its life insurance supervision primarily because these industries are considered to have
department, Reuters reports. The new rules followed talent shortages. According to the Interim Provisions
a shopping spree by Chinese insurers in equities and on Set-up of Schools for Children of Foreign Nationals
real estate after CIRC loosened restrictions on insurance in China, qualified foreign organizations, enterprises,
investment in 2014. In recent months, Chinese insurers and individuals legally residing in China are allowed
have been active investors in both overseas and domestic to establish wholly foreign owned and controlled pre-
markets. Under the new rules, China’s life insurance schools and K12 schools that are only open to the children
companies are required to immediately stop selling of foreign nationals (Zhou 2016).
products in which more than 60 percent of policies are
expected to have less than a year duration, and gradually China’s laws and regulations usually require education
cut back other short- and mid-term products (Zhang and institutions to be non-profit organizations, but there
Miller 2016). are several holes and contradictions across different
pieces of legislation. Article 28 of the Implementation
Despite China’s promise to gradually open up its Measures on Establishment and Operation of Sino-
education sector to the world following its accession to Foreign Cooperative Educational Institutions specifies
the WTO in 2001, the country’s education industry is still that all Sino-foreign cooperative educational institutions
a highly sensitive area for foreign investment. Foreign are prohibited from for-profit activities. This also applies
investors engaging in education in China usually face to the aforementioned international schools for children
very close scrutiny. of foreigners. Correspondingly, education institutions
are usually required to be registered as “private non-
But apparently not when you’re Kobe Bryant. In a enterprise units” in the civil affairs department, rather
country where parents spend heavily on their children’s than registered as “limited liability companies” in the
education, where, until very recently, people were limited Administration of Industry and Commerce (AIC) (Zhou
to only one child each, English education is a particularly 2016).
lucrative niche, since the language is a central part of the
national college examination and is also seen as key to However, the revised National Education Law in
good future jobs. Recently retired basketball star Kobe 2015 abolished the previous provision “no organization
Bryant this past summer selected a Chinese education or individual may establish or run a school or any other
firm for one of his first investments since announcing educational institution for profit-making purposes”,
his move into venture capital. Mr. Bryant’s new US$100 pointing towards a more relaxed attitude from the
million fund will invest an undisclosed amount in VIPKID, government regarding for-profit education (Zhou 2016).
a platform that connects Chinese students with English However, there was an about-face affecting the industry
teachers in North America (Young 2016). in 2016.
But for less famous foreign investors in China’s The recent ratification of the Administrative Law on
education sector, the process is a little bit more Activities of Overseas Non-government Organizations
complicated. According to China’s Catalogue of Industries within the Territory of the People’s Republic of China –
for Guiding Foreign Investment (2015), the education the first comprehensive guiding law for foreign NGOs
industry is divided into three separate categories. While – promulgated on April 28, 2016 and due to come into
compulsory education institutions (primary and middle effect on January 1, 2017, the new law places stringent
318
insurance for property, environmental liability insurance schools) and special training institutions (such as military,
and agricultural insurance (Xinhua 2016b). police, political, and Chinese Communist Party schools)
are still considered prohibited areas, foreign investors are
China’s insurance regulator is tightening its control allowed to invest in pre-school educational institutions,
over short and mid-term life insurance products, in a bid high schools, and tertiary educational institutions
to curb potential risks from aggressive insurers investing in the form of Sino-foreign joint ventures, in which
heavily in stocks and long-term assets using short-term foreign majority ownership is allowed but only when
funds. The China Insurance Regulatory Commission the Chinese party is in a leading position. In contrast to
(CIRC) is reducing the industry total premiums from such these restrictions, foreign investors are encouraged to
products to between 500 billion yuan ($77.3 billion) and invest in sports training and non-academic vocational
550 billion yuan a year, from 650 billion yuan in 2015, said training institutes (such as IT, accounting, English, etc.),
Yuan Xucheng, director of its life insurance supervision primarily because these industries are considered to have
department, Reuters reports. The new rules followed talent shortages. According to the Interim Provisions
a shopping spree by Chinese insurers in equities and on Set-up of Schools for Children of Foreign Nationals
real estate after CIRC loosened restrictions on insurance in China, qualified foreign organizations, enterprises,
investment in 2014. In recent months, Chinese insurers and individuals legally residing in China are allowed
have been active investors in both overseas and domestic to establish wholly foreign owned and controlled pre-
markets. Under the new rules, China’s life insurance schools and K12 schools that are only open to the children
companies are required to immediately stop selling of foreign nationals (Zhou 2016).
products in which more than 60 percent of policies are
expected to have less than a year duration, and gradually China’s laws and regulations usually require education
cut back other short- and mid-term products (Zhang and institutions to be non-profit organizations, but there
Miller 2016). are several holes and contradictions across different
pieces of legislation. Article 28 of the Implementation
Despite China’s promise to gradually open up its Measures on Establishment and Operation of Sino-
education sector to the world following its accession to Foreign Cooperative Educational Institutions specifies
the WTO in 2001, the country’s education industry is still that all Sino-foreign cooperative educational institutions
a highly sensitive area for foreign investment. Foreign are prohibited from for-profit activities. This also applies
investors engaging in education in China usually face to the aforementioned international schools for children
very close scrutiny. of foreigners. Correspondingly, education institutions
are usually required to be registered as “private non-
But apparently not when you’re Kobe Bryant. In a enterprise units” in the civil affairs department, rather
country where parents spend heavily on their children’s than registered as “limited liability companies” in the
education, where, until very recently, people were limited Administration of Industry and Commerce (AIC) (Zhou
to only one child each, English education is a particularly 2016).
lucrative niche, since the language is a central part of the
national college examination and is also seen as key to However, the revised National Education Law in
good future jobs. Recently retired basketball star Kobe 2015 abolished the previous provision “no organization
Bryant this past summer selected a Chinese education or individual may establish or run a school or any other
firm for one of his first investments since announcing educational institution for profit-making purposes”,
his move into venture capital. Mr. Bryant’s new US$100 pointing towards a more relaxed attitude from the
million fund will invest an undisclosed amount in VIPKID, government regarding for-profit education (Zhou 2016).
a platform that connects Chinese students with English However, there was an about-face affecting the industry
teachers in North America (Young 2016). in 2016.
But for less famous foreign investors in China’s The recent ratification of the Administrative Law on
education sector, the process is a little bit more Activities of Overseas Non-government Organizations
complicated. According to China’s Catalogue of Industries within the Territory of the People’s Republic of China –
for Guiding Foreign Investment (2015), the education the first comprehensive guiding law for foreign NGOs
industry is divided into three separate categories. While – promulgated on April 28, 2016 and due to come into
compulsory education institutions (primary and middle effect on January 1, 2017, the new law places stringent
318
