Apparently AIG is running the same scam a lot of other US companies run in China - they get the government to levy new taxes, they pay them and use them to offset taxes (offsetting taxes - not income before tax!) paid in the US. All the while, the new money the foreign authorities get is plowed into things which can directly or indirectly benefit the company - like infrastructure, healthcare or employee housing or training - but don't have to be declared. All while laying off workers at home.
 
http://www.nytimes.com/2009/03/20/business/20aig.html?_r=1
 
"United States tax law allows American companies to claim a credit for any taxes paid to a foreign government. But the I.R.S. denied A.I.G.’s refund claims in 2008, saying that it had improperly calculated the credits. The I.R.S. has identified so-called foreign tax-credit generators as an area of abuse that it is increasingly monitoring."

 http://www.cai.cam.ac.uk/map/waterhouse.php