China took over Anbang Insurance Group for a year on Friday and said its former chairman faces prosecution for "economic crimes", in the government's most drastic move yet to rein in politically connected companies whose splashy overseas investments have fuelled fears of a financial collapse.

The highly unusual commandeering of Anbang signalled deep official concern over the Beijing-based company's financial situation and comes as the government looks to address spiralling debt in the world's second-largest economy.

The China Insurance Regulatory Commission said Anbang, which has made a series of high-profile foreign acquisitions in recent years, had violated insurance regulations and operated in a way that may "severely" affect its solvency.

The announcement also clarified the fate of Anbang's chairman Wu Xiaohui, who was reported by Chinese media to have been detained last June.

The insurance regulator confirmed Wu was being "prosecuted for economic crimes", a startling fall from grace for a man who reportedly married a granddaughter of late Chinese leader Deng Xiaoping.

A statement by government prosecutors in Shanghai said Wu was suspected of fraudulent fundraising and "infringement of duties".

Acquisitive private companies such as Anbang, HNA, Fosun and Wanda have increasingly loomed in the government's cross-hairs as it conducts a sweeping crackdown on potential financial risks.

The four firms were in the vanguard of an officially-encouraged surge in multi-billion-dollar overseas deals by Chinese firms to snatch up everything from European football clubs to hotel chains and movie studios, and were until recently considered untouchable because of their political connections.

Besides Wu's reported links to Deng's family, other examples include Wanda CEO Wang Jianlin -- formerly the country's wealthiest men and a past delegate to the Communist Party leadership congress held every five years.

Various media reports have said a range of other well-connected political figures in China have links to such conglomerates.

But authorities have become increasingly alarmed by the corporations' influence, their webs of subsidiaries and debt, and capacity to trip up the Chinese economy if they over-extend.

With worries rising about capital outflows and reckless accumulation of debt, the government has for more than a year implemented a host of ever-tightening measures to stem the flow of billions of dollars into what it has called "irrational" investments overseas.

Established in 2004, Anbang grew from a property insurer into a financial services powerhouse, hitting headlines in 2014 when it bought the landmark Waldorf Astoria in New York for a record $1.95 billion.

Among other acquisitions, in 2015 it bought US insurer Fidelity & Guaranty Life for $1.6 billion, Korean insurer Tong Yang Life for around $950 million and Dutch insurer Vivat for about $167 million.

Anbang also made a $14 billion bid for Starwood Hotels & Resorts Worldwide, eventually pulling out of a bidding war with Marriott, and was in aborted talks with Donald Trump's son-in-law and key adviser Jared Kushner to redevelop a Manhattan office tower, Bloomberg News reported last year.

- 'Stable overall' -

Its varied holdings could be at risk now, with the insurance commission saying it will dispose of certain Anbang assets, without giving details.

It will remain a private company, but the takeover could be extended for a maximum of one more year if a planned overhaul of Anbang's corporate structure does not proceed as quickly as planned.

The regulator added that Anbang's current situation was "stable overall" and would be further shored up.

Bloomberg News reported last year that Beijing had ordered Anbang to sell its overseas assets, though the company denied that at the time.

Anbang could not immediately be reached for comment Friday.

The firm's website claims it has nearly 2 trillion yuan ($315 billion) in assets.

"Regulators want to solve Anbang's problems without triggering systemic risks," Zhou Hao, an economist at Commerzbank AG in Singapore, told Bloomberg.

"After weighing (the) pros and cons, it's the best way."

After previously encouraging its companies to seek their fortune in foreign markets, China has abruptly changed course, announcing last year restrictions on overseas investments in sports teams, real estate, entertainment and other sectors.

In December it said private companies investing abroad must operate within their financial means and core competencies, and avoid high-leverage financing.

Before Friday's Anbang takeover, Wanda had come under particular government scrutiny.

The commercial property company diversified rapidly into entertainment, theme parks, sports and other sectors, but in recent months has sold off billions of dollars in assets after reports it was under official pressure.

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