(Yicai) Nov. 30 -- China Life Insurance and New China Life Insurance plan to set up a CNY50 billion (USD7 billion) private equity fund for long-term investment in China's mainland stock exchanges as regulators call on insurers and other long-term fund managers to step up their allocations in stocks to inject new life into the country’s stock market.

Honghu Private Securities Investment Fund, which will be equally invested in by the two parties, will choose stocks of companies with good corporate governance and sound business operations to build positions where appropriate under market-oriented principles, China Life said yesterday

New China Life is investing in the project to boost its long-term investment assets in line with the company’s investment strategy, to optimize the matching of assets and liabilities of insurance funds, and to improve the efficient use of funds, the Beijing-based insurer said.

It is the first time that two large insurers have jointly set up a private securities investment fund and follows calls from China’s financial regulators in recent months for long-term funds to play a bigger role in the stock market.

Now is the time for medium and long-term funds, including pensions, insurance funds and wealth management funds, to increase their investments in equity while interest rates are low, China’s economy is going through a period of transformation and upgrading and the financial market is further reformed, the China Securities Regulatory Commission said in August.

China Life Asset Management and New China Assets Management are also linking arms to set up their own fund, called Guofeng Xinghua Private Equity Fund Management, with equal contributions of CNY5 million (USD701,105) each.

China started to allow insurance asset managers to issue and manage insurance private equity funds in 2015. By the end of last year, there were 75 such funds, with a size of CNY549.2 billion (USD77 billion), registered at the Insurance Asset Management Association of China.

The National Administration of Financial Regulation also rolled out more measures, including reducing some high-risk factors, in September to encourage insurance companies to use more funds for long-term investment.

Editor: Kim Taylor