Sale of AIG Taiwan Unit Grows Tense

The sale of AIG's Taiwan unit has fallen under further investigation by lawmakers.
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New York, NY (

TheStreet

) -- In another move that could potentially slow

AIG's

(AIG) - Get Report

efforts to sell its Taiwan unit, some lawmakers in Taiwan are accusing a group of Hong Kong buyers of being a front for mainland Chinese interests, the

Wall Street Journal

reports.

Taiwanese legislation stipulates that companies with 30% or more of their money being funded by mainland China cannot buy into a Taiwan financial firm.

Taiwan's Ministry of Economic Affairs is reportedly investigating whether the Hong Kong consortium of buyers is being backed by mainland China investments. The Hong Kong consortium, consisting of Primus Financial and China Strategic Holdings, has been seeking to acquire about a 98% stake in Nan Shan, the AIG unit.

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The consortium alarmed Taiwan officials last week when it announced its intention to sell a 30% stake in Nan Shan to Taipei-based credit-card issuer Chinatrust Financial for a 9.95% China Strategic stake in Chinatrust. A China Strategic spokeswoman says that the deal would allow Chinatrust the option to raise its stake in Nan Shan over a three-year period, the South China Morning Post reports.

Two people close to Chinatrust say that the company now wants the majority control of Nan Shan, according to SCMP.

"The regulators are uncomfortable with the Hong Kong buyers having control

of Nan Shan in the long term," said one of the sources cited by SCMP.

Although Taiwan and China are becoming increasingly open to strengthening their business ties, Taiwan is still wary of Chinese interests on the island. The two split in civil war in 1949 and, in recent years, Beijing has been pushing more aggressively for a one-China policy that eventually would see China and Taiwan united under one government.

The majority of residents in Taiwan are against the idea of communist control and have closely been watching developments in Hong Kong since the former British colony was returned to China in 1997.

In April, Taiwan's Far EasTone Telecommunications announced that it would sell 12% of the company to China's state-owned China Mobile. China is still waiting for approval from Taipei.

Earlier this month, about 1,000 employees from Taiwan's largest life insurer stood in front of the building of parliament in Taipei City urging lawmakers to closely supervise the sale of the Nan Shan and protect their jobs and interests.

Founded in 1963, Nan Shan has assets of more than $46 billion and almost 8 million policies held by roughly 4 million policyholders.

AIG Shares have inched 0.34% lower to $35.16 in after-hours trading.

-- Reported by Andrea Tse in New York

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