Report AIG to Receive 4 New Licenses in China, Then 100% Ownership To End

Following up on earlier reports (See IJ Website, Dec.7), the Wall Street Journal has indicated that Chinese Premier Zhu Rongji and American International Group’s CEO Maurice “Hank” Greenberg have negotiated a compromise agreement concerning AIG’s future operations in China.

According to the WSJ, AIG will be given licenses to operate 100 percent owned subsidiaries in four additional cities, Beijing, Suzhou, Dongguan and Jiangmen. Any future subsidiaries would require a 50/50 partnership with a Chinese company.

AIG already has 8 licenses to operate both life insurance and property/casualty subsidiaries in China. It has established offices in Shanghai, where it already controls about 10 percent of the life market, Guangzhou, Shenzen and Foshan.

The compromise was apparently worked out at the highest level over the weekend, and will coincide with China’s official accession to membership in the World Trade Organization tomorrow.

It should settle once and for all the ongoing dispute between AIG, backed by the U.S., and the European Community, which felt that allowing AIG to have 100 percent ownership rights in its Chinese operations gave the company an unfair advantage over European competitors.

In addition to its presence in Shanghai, and in China’s capital, Beijing, AIG will be able to operate wholly owned subsidiaries in most of China’s other important business centers, a valuable concession, which apparently persuaded Greenberg that continuing the dispute would eventually become counterproductive.