UPDATE 2-China Life to invest more in stocks, bonds

(Adds overseas and rural business plan, quotes)

By George Chen and Helen Ding

DUNHUANG, China, Sept 9 (Reuters) - China Life Insurance Co Ltd (601628.SS) (2628.HK), the country's top life insurer, said it plans to invest more in a flagging domestic stock market after a sharp drop this year made share valuations more attractive.

China Life will also increase its investments in corporate bonds, especially those issued by major Chinese enterprises, to seek stable returns, Wang Junhui, vice president of the group's asset management unit, said on Tuesday.

"After the sharp market declines this year, we believe the market looks very attractive already if you look at it in a mid-term or long-term perspective," he said.

The company had cut its equity investments to 13.3 percent of its total investment assets as of end-June from 23 percent six months earlier. Wang said the portion of equities in its portfolio would rise, though he declined to say by how much.

The insurer intends to participate in more private equity deals to diversify its portfolio, Wang said, adding China Life had secured some potential projects but also needed to seek relevant approvals from the government.

China's benchmark Shanghai Composite Index .SSEC is down nearly two-thirds from last October's record peak due to worries about slowing corporate earnings growth and new supplies of equity. The index had slipped on Monday to its lowest in 21 months but closed up 0.11 percent on Tuesday.

GO RURAL, GO ABROAD

This year's stock market tumble has hurt investment income at Chinese insurers, although China Life's 32 percent drop in first-half net profit was not as bad as the market had forecast.

To support earnings growth, the insurer is keen to expand into rural markets while seeking investment opportunities in overseas markets, Chairman Yang Chao said on Tuesday.

Yang said China Life would target villages such as Dunhuang's Huangqu, where farmers earn an average 4,500 yuan ($658) a year but want health insurance in case they have a serious illness.

"That market is huge. The rural market is certainly where we are very keen to secure greater success," said Wang, noting that China Life already dominated the market of many third-tier rural cities and had a more than 80 percent share of the domestic life insurance market.

Wang said China Life had reviewed several proposals to move into overseas markets through investments or by teaming up with foreign partners, but had made no decisions.

Wang also said there was currently no plan to seek a listing for the entire group as conditions for that were not yet ripe. The listed company is 68 percent-owned by China Life group.

Wu Dingfu, chairman of the China Insurance Regulatory Commission, said last week that China Life was aiming to list the assets of the whole group.