Maybe no other foreign chief executive officer is more familiar with China than Maurice R. Greenberg. In 1975, as Chairman of the Board of American International Group Inc. (AIG), Greenberg paid his first visit to China. During the following 30 years, he has been to China several times every year. You can never ignore a country with such a size, Greenberg said, believing that China will be a significant leader in the world.

After his first China tour, Greenberg broke into the China market step by step by cooperating with the People's Insurance Co. of China (PICC). In 1992, AIG got the first approval granted to establish a foreign company in China. Greenberg applied to rent Building No. 17 of Zhongshan Dongyilu on the Bund in Shanghai for 30 years, where American International Assurance Co. Ltd. (AIA), a wholly owned subsidiary of AIG, first began operations in 1931. In 1996, the building was named "AIA Building," with three big Chinese characters meaning "back to hometown" inside the building. AIA, which began operating again in 1992 under AIG, became the first and only foreign-funded insurance company in China until now.

Greenberg made the right decision since AIG soon achieved substantial profits in China. AIA has become the strongest foreign-funded insurance company in the country, with eight branches and sub-branches in China. By the end of 2005, AIA had generated more than 1 billion yuan in China, ranking first among foreign-funded insurance companies in China.

As for the end of the transitional period after China's accession to the World Trade Organization(WTO), Greenberg believes that greater market access will bring fiercer competition. Future competitors come from not only the insurance industry, but also other financial sectors such as banks.

More cooperation than competition

"Chinese insurance companies' and foreign-funded insurance companies' advantages are complementary, laying a foundation for later cooperation between the two sides," said Xu Shuijun, General Manager of the AIA Beijing branch. According to him, on the open market after China's accession to the WTO, cooperation between Chinese and foreign-funded insurance companies should trump competition as the common mission of Chinese and foreign insurance companies is to make a bigger insurance industry market.

The insurance industry is the most open sector among China's financial services, but competition is not as fierce as expected. On the contrary, insurance companies from home and abroad are advancing side by side through cooperating with and learning from each other. Statistics from the China Insurance Regulatory Commission (CIRC) show that during the past five years, Chinese insurance industry revenues have been growing at an annual rate of more than 30 percent. In 2001, industry turnover stood at 210 billion yuan, but in the first four months of this year, the turnover already totaled the same amount.

"The Chinese insurance industry has not been developed as long as other financial service sectors, hence it has more potential," Xu said. "It is far easier to exploit new market fields and co-develop the insurance market than to rub off market share from competitors." Xu's opinion reflects that of many industry insiders.

In 1992, the AIA Shanghai branch trained the first group of insurance agents in China. This sales pattern was soon adopted by domestic insurance companies that exploited a pattern more suitable for China: developing their businesses by using the extensive social connections of insurance agents. Even now, domestic-funded insurance companies still have better marketing services and social connections than their foreign counterparts. In 2005, Chinese insurance companies occupied 93.1 percent of the insurance market-much more than foreign-funded ones did.

However, foreign-funded insurance companies have their own strengths. Most of them focus on the weak areas of Chinese insurance companies, paying attention to product innovation and more balanced product structure. In fields like liability insurance, project insurance and credit insurance, foreign-funded insurance companies hold absolute advantages. In recent years, they have been growing at high speed. According to Ba Shusong, Deputy Director of the Financial Institute of the Development Research Center of the State Council, in 2005, premiums of domestic-funded insurance companies grew 8.52 percent year on year, while those of foreign-funded insurance companies soared 248.45 percent over a year earlier. Further, among the 82 insurance companies on the Chinese market by the end of 2005, there were 41 foreign-funded ones with nearly 400 branches and sub-branches.