Senior officials from China's financial regulatory authorities have expressed their support for cooperation between banks and insurance companies.

As the transitional period of the World Trade Organization (WTO) expires at the end of the year, many Chinese commercial banks have felt the need for mixed operations, said Tang Shuangning, vice-chairman of the China Banking Regulatory Commission (CBRC).

Wu Dingfu, chairman of the China Insurance Regulatory Commission (CIRC), also said recently that the CIRC supports insurers investing in bank shares. "The CIRC is also ready to receive applications from banks to set up insurance firms," he said.

China's financial regulatory rules, which took effect in 1995, currently ban banks from engaging in the insurance business, and vice versa.

But under its agreement with the WTO, China is expected to open fully its financial markets to foreign competitors at the end of 2006.

As most of the leading international financial groups are engaged in banking, securities and insurance concurrently, lifting the restrictions on their operation would make the 10-year-old law irrelevant.

According to Tang, major Chinese banks, including the Industrial and Commercial Bank of China, the Bank of China, the China Construction Bank, the Agricultural Bank of China and the China Communications Bank, have expressed their intentions to set up their own insurance companies.

CIRC figures show that Chinese insurers have become major investors in the country's stock market, investing as much as 49.9 billion yuan (6.3 billion U.S. dollars) in stocks, mainly of commercial banks.

China's largest insurer, China Life Insurance (Group) Company and its Hong Kong-listed branch, China Life Insurance Company Limited, were among the biggest buyers of shares in the Industrial and Commercial Bank of China (ICBC) when it made its initial public offering in September.

The two companies together bought 6.4 billion HK dollars of stock in ICBC, which is expected to list on the Shanghai and Hong Kong stock exchanges this month.

Insurance companies make up five of the 14 strategic investors chosen by the Bank of China for its A shares that listed in Shanghai in July.

Sun Jianyong, an official with the CIRC, said insurers' investments in capital markets will continue to grow rapidly in line with premium revenues.