Conflicting Reports on China, AIG, WTO Dispute

September 5, 2001

An article in today’s edition of The Asian Wall Street Journal indicates that Chinese regulators are pressuring American International Group to sell part of its lucrative life insurance subsidiary to bring its ownership down to 50 percent, in-line with the agreement between China and the World Trade Organization concerning insurance operations. Reuters News Agency, however, reports that officials in Beijing have denied any such action.

The controversy involves AIG’s privileged position in the Chinese life market. It’s the only foreign based insurer permitted to own more than 50 percent of a Chinese company. AIG set up a 100 percent wholly-owned subsidiary when it became the first foreign insurer to reenter the Chinese market.

As part of the negotiations for China’s entry into the WTO, U.S. and EU negotiators have established a compromise formula allowing up to 50 percent foreign ownership of Chinese subsidiaries, but the Europeans have complained that allowing AIG to maintain its present structure gives it an unfair advantage. They’ve asked China to limit any future expansion to conform to the 50 percent rule, including the establishment of branch offices. AIG has steadfastly refused to accept this limitation, or to make any change in its current structure.

The AWSJ article quoted an unnamed official at the China Insurance Regulatory Commission as saying that AIG may have to sell 50 percent of its current life insurance operations in China and form joint ventures with local partners. Such a move would reverse current policy. Chinese officials have consistently maintained their commitment to preserve AIG’s business operations as they’re now established, tacitly recognizing that it has a “special status.”

The Reuters article quoted a similarly unidentified official at China’s Ministry of Foreign Trade and Economic Cooperation who took part in the WTO negotiations as affirming that there were no plans to demand that AIG change its operations, and that it would continue to do business under the current organizational structure.

So far there’s been no comment on the conflicting reports from AIG, or its crusty Chairman Maurice “Hank” Greenberg.

Was this article valuable?

Here are more articles you may enjoy.