Insurance Funds Expand Overseas with a New "Route", Taikang Asset Makes a Move in the "Southbound Connect"

A piece of news from the insurance asset management industry has recently spread: Taikang Asset Management, as one of the first batch of entrusted institutions, has successfully completed the first investment transaction under the Southbound Bond Connect program.

The “Southbound Bond Connect” refers to the southbound cooperation between mainland China and the bond market, which is a mechanism for mainland institutions to invest in the bond market via infrastructure connectivity. When it was launched in September 2021, only 41 banking financial institutions (open market primary dealers of the People’s Bank of China) were eligible to participate, with non-bank institutions not included.

It wasn’t until July 2025 that the People’s Bank of China announced the expansion of the investor base for the “Southbound Bond Connect”; for the first time, brokerages, asset management companies, insurance, and wealth management (non-bank) institutions were included as eligible investors.

Now, Taikang Asset Management has become one of the first insurance asset management companies to “take the plunge.”

Where is the “sweet spot” of the Southbound Bond Connect?

Why are insurance asset management institutions so keen on the “Southbound Bond Connect”?

In the current macroeconomic environment, insurance funds face strong demands for return and duration matching in asset allocation.

The bond market offers more long-duration, high-coupon options, especially offshore RMB bonds (dim sum bonds) and China USD bonds. The “Southbound Bond Connect” business helps insurance funds increase allocations to long-term assets and improve long-term investment returns.

More importantly, in the past, overseas investment by insurance funds mainly relied on QDII quotas. As of the end of March 2026, a cumulative quota of $39.4 billion had been approved for all 48 insurance companies in the industry.

However, under the “Southbound Bond Connect”, insurance accounts are managed with independent quotas — the initial annual total quota is 500 billion RMB equivalent, with a daily quota of 20 billion RMB, representing a new highway for investments.

How is Taikang positioning itself?

According to industry sources, Taikang Asset Management was anything but unprepared; on the contrary, they made thorough preparations. To ensure the smooth execution of the first transaction, the company specially set up a preparatory task force to systematically plan in terms of institution building, investment research preparation, credit management, and system development.

At the same time, acting as the trustee, Taikang Asset Management and the client Taikang Life Insurance worked closely together to formulate specific investment strategies, considering the long liability duration of insurance funds.

The ability to react quickly also stems from Taikang Asset Management's QDII qualification obtained as early as 2007 and years of overseas investment experience. The opening up under the “Southbound Bond Connect” is essentially an extension of its mature capabilities. 

Not the Only One

 Taikang’s strategic move sends signals beyond just one institution.

The “Southbound Bond Connect” brings multiple benefits for the utilization of insurance funds. On one hand, it helps relieve the pressure of asset shortage faced by insurance funds and provides a practical path to improving overall investment returns; on the other, it pushes the outbound deployment of insurance funds from relying on QDII quotas to a more stable and predictable regular mechanism.

For the bond market, insurance funds are natural “long-term capital,” characterized by long holding periods and low turnover. Their participation helps optimize the investor structure in the offshore bond market, increasing its depth and liquidity.

From a broader perspective, this is also another example of high-level financial opening up, further consolidating the status of the international financial center.

Opportunities Abound, But Entry Barriers Remain High

In practice, insurance funds face three main challenges:

First is the challenge of exchange rate fluctuation: investing RMB funds in foreign currency bonds means exposure to forex risk, and hedging operations will increase both costs and operational complexity;

Second is the challenge of credit identification: the information disclosure standards for offshore bonds differ from those for domestic bonds, and credit profiles of issuers vary widely, requiring the establishment of an independent overseas credit rating system;

Third is the challenge of different market liquidity characteristics: some offshore bonds are less actively traded than domestic ones, making large-scale trades susceptible to impact costs.

Industry insiders also caution that offshore bond investments still face practical challenges in liquidity environment, credit risk identification, and exchange rate volatility, making it necessary to closely monitor the management and hedging of related risk exposures in the future.

The first transaction has been completed, but the real challenge is just beginning.