As China seeks to bolster its technological advancements through “patient capital” – funds which focus on long-term investment and hold greater tolerance for risk – insurance firms will play an essential role, a high-profile editorial published on Friday asserted.
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The piece, which ran in the Economic Daily newspaper, urged insurance companies to optimise their investment strategies and evaluation mechanisms to better support long-term investments in scientific innovation.
While insurance funds – inherently stable institutions with a tendency towards long-term thinking – have many advantages in taking on this role, challenges persist.
“The current incentive mechanism and assessment system are not conducive to long-term investment,” said the periodical, noting some insurance companies focus on short-term returns that are vulnerable to volatility in the market. The Economic Daily is affiliated with the State Council, China’s cabinet.
The editorial also expressed concern listed insurers could be deterred from long-term high-risk investments due to their responsibilities for quarterly financial disclosures.
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As such, the report called for insurance funds to refine their accounting practices and extend their cycles for performance assessment to three years or more.