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Foreign firms eye major state-owned Chinese bank

US investment bank Goldman Sachs and German financial firm Allianz are in talks to buy a stake of more than US$1 billion (830 million euro) in one of China's biggest state-owned commercial banks, a news report said yesterday.

The talks with the Industrial and Commercial Bank of China (ICBC, 中國工商銀行) are at an early stage, the Asian Wall Street Journal said on its Web site, citing unidentified sources. The report said it wasn't clear how large a stake the foreign firms would get in the bank.

A spokesman for ICBC said the bank has held talks with potential strategic partners but refused to release any details. The spokesman would give his name only as Xie.

State banks are looking for foreign partners to help them modernize operations and become more competitive as China prepares to open the industry to foreign competition by 2007 under commitments to the World Trade Organization.

Bank of America agreed last month to pay US$3 billion for a 9 percent stake in China Construction Bank (中國建設銀行) -- another of China's "big four" state-owned commercial banks.

Foreign investors in Chinese banks include HSBC Plc of Britain, Singapore's Temasek Holdings and American financial firm Newbridge Capital. Citigroup and Dutch lender ING Groep NV say they are looking for Chinese partners.

Goldman Sachs already has a 33 percent stake in a Chinese securities firm. Allianz, an insurance and banking conglomerate based in Frankfurt, Germany, owns Dresdner Bank.

ICBC is China's biggest commercial bank by deposits. But it also is the most financially troubled of China's major state-owned banks, which are struggling to shed billions of dollars of unpaid loans to state companies. The government announced in April that it would inject US$15 billion into ICBC as part of efforts to turn it into a profitable, free-standing competitor.

ICBC and other Chinese banks also are struggling to modernize their accounting, plugging gaps that have permitted massive thefts through phony loans and other schemes.
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