Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

Foreign financial firms have found another way to make money in China as the economy slows: by selling stakes acquired when the nation was a much smaller market.

This week, AIG raised more than $750 million offloading a holding in PICC Property & Casualty, the largest nonlife insurer in China, while CaixaBank plans to sell its 17.2 percent stake in Bank of East Asia -- a Hong Kong institution with 129 branches in China -- to the Spanish bank's parent. Both deals came after the stocks rebounded 9 percent or more from their September lows. Citigroup is disposing of its minority interest in Guangfa Bank, Deutsche Bank signaled it may sell its stake in Huaxia Bank and a CaixaBank rival, Banco Bilbao Vizcaya Argentaria, cut its ownership of China Citic Bank to 4.7 percent after a $1.7 billion stake sale in January.

Off Their Lows
PICC and Bank of East Asia have rebounded since September Percent change

The disposals bring to mind the exodus from prized stakes in Chinese banks in the wake of the 2008 financial crisis, when the nation's financial system was booming -- and its plague of bad debts was far in the future. Then, UBS, Royal Bank of Scotland, Bank of America and others raised much-needed funds by selling shareholdings amassed in the mid-2000s in institutions such as China Construction Bank and Bank of China. Two years ago, Goldman Sachs exited Industrial and Commercial Bank of China, the nation's biggest, with the last in a series of billion-dollar sales.

AIG itself was forced to sell its pan-Asian life insurer, AIA Group, in a 2010 Hong Kong IPO in order to repay the U.S. government bailout. AIG's involvement with PICC, like Goldman's with ICBC, began with the purchase of a stake in a struggling institution, when it took 9.9% of the insurer in 2003. It has whittled down that interest in recent years, most recently with a roughly $500 million sale in March, and now has 5.7 percent left in the Chinese company.

The sales achieve two things: raising money while helping AIG and CaixaBank conserve capital as their regulators make holding minority stakes in financial firms expensive. As AIG President Peter Hancock says, selling the PICC stake achieves the U.S. insurer's aim of "focusing  capital" in "core markets and enhancing  financial flexibility."

Although Hancock says that AIG greatly values its strategic partnership with PICC, Western investments in Chinese financial firms were largely symbolic -- or as Sanford C. Bernstein says of the AIG-PICC relationship,  "a confidence vote rather than real strategic alliance." Foreign life insurers' share of China's market remains around 4 percent, while property and casualty companies have a tiny 1 percent, scant progress after years of tie-ups.

That doesn't mean the party is over for foreign financial firms seeking funds from China. At least 20 foreign banks still have minority stakes in Chinese banks, according to Ernst & Young. China caps foreign ownership of a domestic bank at 25 percent, with a single foreign investor limited to 20 percent, making any meaningful influence on operations tough.

Australia's ANZ Bank holds shares in Bank of Tianjin, as well as Shanghai Rural Commercial Bank. HSBC owns part of Bank of Communications. Italy's Intesa Sanpaolo remains a shareholder in Bank of Qingdao after that company's $607 million Hong Kong IPO late last month. 

With AIG retaining a stake in PICC and Bank of East Asia still in the CaixaBank "family," we probably haven't seen the end of the string of disposals. Today, JP Morgan Chase and UBS announced that they're part of a 10-member group investing $7 billion in Postal Savings Bank of China. That should serve those banks well after the Chinese institution, which has more branches nationwide than any other, goes public in a multibillion-dollar float some time next year.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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