Greenberg invests confidence in mainland

PUBLISHED : Monday, 22 October, 2007, 12:00am
UPDATED : Monday, 22 October, 2007, 12:00am

The mainland's health care, financial services and environment protection-related businesses are the three major sectors that former American International Group chairman Maurice Greenberg would like to invest in through his own private equity firm.

The 81-year-old insurance veteran told the South China Morning Post that he would like to invest in the emerging markets of the mainland, India, Russia, Brazil and the United States.

He says he believes the mainland will bypass Germany this year to become the third-largest economy in the world, and will ultimately become the world's No1 economy, surpassing the US and Japan.

'China is going to be either the No1 or No2 economy worldwide in 20 years time. In fact, I believe it is more likely that China will be No1 rather than No2 in the world when I talk to you again in 2027,' Mr Greenberg said.

He plans to invest in a number of projects in the mainland through his privately run equity fund company CV Starr.

'I am looking at a number of health care-related projects in China because China is undergoing a major reform process in its medical and health-care system. This will pave the way for a lot of growth opportunities in this area,' Mr Greenberg said.

'The financial services sector is another interesting area. As its economy grows, China is going to see rapid development in the financial services sector - in its banking, insurance and securities industries.'

He says environmental business is another growth area as pollution problems mount.

'Pollution is a challenge in China but at the same time it brings business opportunities,' he said. 'Environment protection-related business will be very much in demand. China could cope with these challenges. I am very confident.'

Mr Greenberg says his confidence in the country's economy dates back to his first visit in 1975, or three years before market reforms were introduced.

'In 1975, I already knew no one could ban China from growing into a big player. There was no way for 1.3 billion people to be barred from the outside world,' he said.

Mr Greenberg joined AIG in 1960 and took over the company's management in 1967 when founder Cornelius Vander Starr passed away. Under his leadership, AIG went public in 1969 and expanded overseas.

Mr Greenberg has made numerous trips to the mainland and became a friend of former premier Zhu Rongji. AIG became the first foreign insurance company to operate there in the early 1990s.

Mr Greenberg believes the country faces several major challenges, including global protectionism which hinders its exports growth, and education, which is crucial in maintaining an adequate pool of talent to make its economy run.

'What is important is to maintain social stability in China,' he said. 'There are 1.3 billion people and if the 1.3 billion people all go in different directions, it would not work.'

Mr Greenberg was forced to step down in 2005 amid an investigation by then New York attorney general Eliot Spitzer into a series of accounting issues at the firm. In February last year, AIG settled with Mr Spitzer and the Securities and Exchange Commission, paying US$1.6 billion in fines.

After selling his AIG stocks, Mr Greenberg promptly started building his second empire through his private equity fund.

In January, CV Starr teamed up with Citic Securities, the mainland's largest listed brokerage, in setting up a one billion yuan private equity fund - with each side taking equal stakes - to invest in mainland companies before their initial public offerings.

In July, Mr Greenberg joined other heavyweights, including Li Ka-shing, Lee Shau-kee and Saudi Prince Alwaleed bin Talal as cornerstone investors in the initial public offering of Fosun International, the country's largest privately owned conglomerate. The stock rose 21 per cent on its debut.

A month later, Mr Greenberg and other investors together with Goldman Sachs Group pumped US$3 billion into Goldman's Global Equity Opportunities Fund, a hedge fund that has fallen more than 30 per cent due to the US subprime mortgage turmoil.