Study On The Impact Of Insurance Sector FDI On China's Insurance Market Efficiency

With the trend of financial globalization and liberalization, foreign insurers' presence obviously has competition, demonstration and innovation effect on China's insurance market, but meanwhile, might transmit financial risks and increase the difficulty in supervision. Therefore, it is very necessary to empirically research the impact of insurance sector FDI on China's insurance market efficiency. But the existing literatures have not yet studied it a lot. Under the new condition of fully opening up, to analyze the impact of insurance sector FDI on China's insurance market efficiency and countermeasures to utilize insurance sector FDI could not only fill the gaps in research, but provide suggestions for policy-making, which is of great significance in both theory and practice.This paper first evaluates the related literatures, followed by analysis of the present situation of insurance sector FDI in China. And combined with the characteristics and practices of insurance business, this paper illuminates both positive and negative impact of insurance sector FDI on China's insurance market efficiency. Then we measure the TFP of 22 life insurers and 21 non-life insurers for the period 2003-2006 applying Malmquist index approach, and establish the Panel Data model to empirically test the relationship between insurance sector FDI and China's insurance market efficiency. The estimate results show that the impact of insurance sector FDI on China's insurance market efficiency is positive. In order to effectively perform further the function of insurance sector FDI in improving efficiency, this paper finally suggests that we should continue to reasonably open the insurance market, strengthen the guide for foreign insurance companies, and constantly improve the level of insurance supervision, and pay much attention to train insurance professionals.