BEIJING (AP) - British bank HSBC is buying a 19.9 percent stake in one of China's biggest state banks for US$1.7 billion, dramatically expanding the foreign presence in the top ranks of Chinese finance, state television reported Friday.
HSBC was to sign an agreement Friday to buy into Shanghai-based Bank of Communications, one of China's main state-owned commercial banks, China Central Television reported on its midday national news.
The deal is the biggest move yet by a foreign bank into China's rapidly evolving banking industry.
Beijing has promised to let foreign banks compete on an equal footing with Chinese institutions by 2006 under commitments to the World Trade Organisation.
It would give HSBC a platform to promote credit cards and other products to China's growing consumer market, possibly giving it an edge over foreign rivals such as U.S.-based Citibank and Britain's Standard Chartered.
China has allowed limited foreign investment in its banks in hopes of improving management and modernizing state-owned financial industries that lag decades behind foreign competitors.
Dozens of foreign banks have branch offices in China or joint ventures with Chinese banks.
HSBC and Bank of Communications were to hold a news conference later Friday to announce the agreement, which still requires government approval.
Bank of Communications has a network of 2,700 branches and reported US$115 billion in assets at the end of 2003, with US$100 billion in customer deposits.
The bank said last month that it was considering selling shares to Chinese investors, as well as on stock exchanges in Hong Kong or the United States.
The HSBC stake would be just under the maximum 20 percent share that Chinese rules allow a single foreign investor to own in a Chinese bank. - AP
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