Insurance Australia Group Ltd. scrapped plans for further investment in China and will instead seek growth in other Asian markets, in a sign that Australia’s hopes of boosting services exports to the world’s second-largest economy may be difficult to achieve.
The insurer took the decision after assessing the possibilities available in China, Chief Executive Officer Mike Wilkins said in a statement. Insurance Australia agreed to buy 20 percent of Tianjin-based Bohai Property Insurance Pty in 2011 for about A$100 million ($73 million).
“After completing significant work on assessing the opportunities available, IAG has determined not to pursue further investment in China,” he said. “While we believe in the fundamentals of China, our future focus will be on pursuing growth opportunities in our other Asian markets and our core businesses in Australia and New Zealand.”
The company’s shares rose 4.7 percent, the most on an intraday basis since June, to A$5.25 at 10:41 a.m. in Sydney.
The insurer’s earlier efforts to expand into China have not always run smoothly. In 2007, IAG ended three years of talks to buy a stake in China Pacific Property Insurance Co., citing resistance from the Chinese company’s parent.
Insurance Australia’s decision underscores the challenges faced by Australian companies in seeking growth in China even as the government touts the benefits of a free-trade accord reached with Beijing last year.
IAG is expanding in Asia as part of a plan to reduce reliance on Australia and New Zealand and capture emerging market growth. It has joint ventures in India, Malaysia and has a presence in Vietnam and Thailand. It has also identified Indonesia as a market of interest, according to its website.
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