(Adds financial regulator's comment on the deal, conditions of the review.)

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TAIPEI -(Dow Jones)- Taiwan's government said Thursday it is planning to decide on whether it will approve a Hong Kong consortium's long-awaited bid to buy American International Group Inc.'s (AIG) Taiwan unit by the end of June, after noting that from what it has seen so far, mainland Chinese money isn't behind the purchase pf the insurer.

China Strategic Holdings Ltd. (0235.HK) and Primus Financial Holdings Ltd. (PRIM.YY) acquired Nan Shan Life Insurance Co. from AIG for US$2.15 billion in October, but they have been awaiting regulatory approval from the Taiwan government amid talk that the consortium has been backed by Chinese money.

"We will check thoroughly if there's any money from China behind the consortium by the end of March, and complete the review by the first half of this year if all the papers required are submitted," Hwang said.

Despite warming official relations between China and Taiwan, the island maintains restrictions on investments in its financial services firms by companies backed by mainland cash, especially as Nan Shan is one of the island's three largest life insurers, with assets worth NT$1.6 trillion, 4 million policy holders and 38,000 employees.

Documents submitted by the consortium show that it's not backed by any Chinese money, but the government will further examine the consortium's funding source from overseas channels, Deputy Minister of Economic Affairs Jung-Chiou Hwang said at a legislative briefing.

The deal has been complicated by an agreement in November under which China Strategic planned to sell a 30% stake in Nan Shan to Chinatrust Financial Holding Co. (2891.TW) in exchange for a nearly 10% stake in Chinatrust.

The government will look into whether to approve the share swap between Chinatrust and Nan Shan after the involved parties submit the application, Financial Supervisory Commission Chairman Sean Chen said.

Apart from its source of funding, the consortium must guarantee the benefits of Nan Shan's employees and policy holders, have the professional ability to manage an insurer, have a long-term commitment to running Nan Shan, and have the financial capacity for future fund-raising needs, the financial regulator said in a report to lawmakers.

AIG, which has been selling assets to repay the U.S. government billions of dollars of bailout money, is separately selling its Asian life-insurance business to U.K. insurer Prudential PLC and its second-largest foreign insurer, American Life Insurance Co, to Metlife Inc.

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