Issue 18/2020

Economic Insights
Rural revitalisation in China: a "Blue Ocean" opportunity for insurers

Key takeaways In a nutshell

• Supportive government policy and Zero poverty and increased investment in rural infrastructure are
digital penetration will power strong key 2020 targets for the Chinese government. The size of the
gains in rural economic value,
helping China offset the impact of a rural population represents large consumption and overall
slowing global growth environment. economic growth potential, and a source of increased demand for
• The government targets zero insurance. We forecast that rural-emanating premiums in China
poverty in rural areas this year. will grow by 11% annually to more than CNY 1 trillion in 2025.
• Rural incomes and consumption are
growing by 9-10% annually. There Developing China's rural economy has been part of the government's policy
will be new demand for insurance, agenda for many years. The government has not set an explicit growth target
in a market with still limited for 2020, but is pursuing a broader set of socio-economic goals, including
competition. achieving a 0% poverty rate under existing standards 1 and also increased
• We forecast an 11% annual investment in rural infrastructure (see Table 1). We believe these objectives
increase in rural premiums to more will help China offset a slowing global growth environment, one that had
than CNY 1 trillion in 2025. already weakened due mainly to trade tensions with the US before the onset
• Rural health insurance premiums of this year's COVID-19 crisis. Relative to the urban setting, the rural
will grow by around 20% annually, consumer and infrastructure sectors present significant growth potential. For
agriculture by close to 13%, motor insurers, the rural sector is a "Blue Ocean" opportunity of untapped demand
by 11% and other P&C by 22%. and still limited competition. We forecast that total rural premiums written
will grow by 11.1% annually from 2020 to reach CNY 1 trillion in 2025, a
notable uptick from 3% annual growth in agro premiums in the last five years.
Rural China accounts for around 40% of the country’s total population. In
About Economic Insights 2019, the average disposable income for the rural population was
Analysis of key economic CNY16 000, a 9.6% increase from 2018. For urban residents, it was
developments and their implications CNY 42 000, up by 7.9%. 2 Average rural consumption per capita grew by
for the global re/insurance industry. 9.9% from 2018 (urban +7.5%). An increase at current rates will power
strong rural consumer and infrastructure 3 demand over next few years.
Managing Editor To date some structural obstacles have held back deeper rural economic
Jérôme Haegeli reform in China. A major impediment has been that farmland, which is
Swiss Re Group Chief Economist collectively-owned, cannot be free-market sold or rented. Another obstacle
has been the widening inequalities between urban and rural populations in
Authors terms of access to pension, medical, education and other welfare provisions.
Li Xing To solve these problems, the Two Sessions held earlier this year specifically
Julia Chen emphasized the need for market-based allocation of land, and the importance
of progressing regional economic integration through coordination of urban
We welcome your feedback. For any and rural development. 4 In recent years, with supportive government policy 5
comments or questions, please and rapidly growing digital (including mobile) penetration in rural areas, 6
contact: institute@swissre.com new business areas and models have started to emerge in agriculture and in
rural regions generally. These include, for example, facility agriculture, 7 e-
1
Net income per person per year. The current standard, set in 2010, is around CNY 4 000 in 2020 prices.
2
Residents' income and consumption in 2019, National Bureau of Statistics of China, 2020
3
Including new infrastructure featured in information sector and modern agricultural facilities.
4
Economic Insights – China's Two Sessions, Swiss Re Institute, 9 June 2020.
5
For example, The Decision on the Right to Authorize the Use of Land, State Council, 2020
6
In 2019, number of rural internet users reached to 250 million, accounting for 26.3% in total internet users.
7
Using man-made facilities for planting and aquaculture, to increase yields and quality of agriculture products.

25 June 2020

Swiss Re Institute – sigma research 1

Economic Insights
Rural revitalisation in China: a "Blue Ocean" opportunity for insurers

commerce and rural tourism, which has all created more wealth in the rural
economy. In 2018, online sales of agricultural products accounted for 19%
of all-sector revenue in same year, and the share continues to increase. In the
same year, rural tourism generated CNY 800 billion in revenue, accounting
for 15.6% of total domestic sector turnover.
With continued government support and late-mover advantage, we believe
ongoing development of the rural economy will present many opportunities
for insurers, especially in health, agriculture and motor. Insurance companies
are already working with the government to provide tailored products for
rural residents, agricultural production and property. Based on a continuation
of current trends, we forecast that agricultural modernisation and increases in
rural incomes will lead to 11.1% CAGR in rural premiums from 2020 to
more than CNY 1 trillion in 2025. We estimate that rural L&H premiums will
reach CNY 480 billion by 2025, accounting for 8.7% of the national total.
Rural P&C premiums are forecast to grow to CNY 529 billion, making up
23.2% of China's total P&C market. 8 By lines of business, the totals will
include CNY 200 billion for rural migrant workers 9 (CAGR 4.1%), CNY 100
billion in rural life (10%), CNY 180 billion in rural health (20.3%), CNY 171
billion in agriculture (12.7%), CNY 302 billion in motor (10.8%) and CNY 56
billion in premiums from other P&C lines (CAGR 22.9%).

Figure 1: Focus of Annual No.1 Government Document, issued by China's central government since 2004

Source: Compiled by Swiss Re Institute

8
Rural Revitalization: extending the reach of insurance across China's rural areas, Swiss Re Institute, 2020.
9
Rural migrant workers are workers with a rural household registration who are working and living in an urban area.
According to national statistical bureau, there were an estimated 291 million rural migrant workers in China in 2019.

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