The move is an indication that domestic financial firms are speeding up their efforts to prepare for China's entry into the World Trade Organization (WTO).

The Shanghai-based Bank of Communications, the nation's fifth largest commercial bank, said it was planning to sell 15 percent of its assets to two to three foreign financial giants to strengthen its position in the market.

The move is likely to be followed by a listing on the domestic stock market, a goal the bank has held for many years.

According to insiders, US-based Citibank, Britain-based Hongkong and Shanghai Banking Corporation and Germany-based Deutsche Bank are all interested in taking a stake in the Bank of Communications.

None of the banks were available for comment.

Analysts believe the banks are unwilling to unveil any details regarding the negotiations before they receive approval from government regulators.

"We are in negotiations with a number of foreign players and two foreign companies could finally invest in our firm," said Fang Chengguo, president of the bank, in an interview with Business Weekly.

The potential tie-up marks the boldest breakthrough after the issuing of the nation's 10th Five-year Plan in March, which vowed to reform domestic financial companies by diversifying structures and encouraging foreign investment.

A 5-percent stake in the Bank of Communications is likely to be too small for foreign companies to achieve their bold goals in China.

It is believed that foreign firms are usually reluctant to put their funds into Chinese firms, because they hope to gain more corporate control through forming joint ventures in the future.

"Foreign involvement in the operation of our bank also remains a top priority in any merger," said Fang.

He said foreign companies could bring technological and management experience to the company.

"Foreign involvement could really bring us on track with our foreign counterparts," said Fang.

Unlike the biggest four State-owned commercial banks, which are mired by bad loans and overstaffing, the Bank of Communications is much more active in the financial market.

Experts said the alliance could result in a "win-win" result for all the related parties. "There will not be a 'live or die' choice in China's financial markets between foreign and domestic players," said He Qiang, a professor with the Central University of Finance and Economics.

He said other domestic financial companies should follow the same strategy and join hands with foreign counterparts.

The potential alliance could also establish a benchmark for China's other financial firms seeking to establish a model for co-operative ventures with foreign multinationals in the future.

A number of smaller commercial banks and insurers, such as the Shanghai Pudong Development Bank and Huatai Insurance, are believed to be interested in foreign alliances.

Earlier last year, the local Bank of Shanghai successfully lured an investment worth 5 percent of its stakes to the International Financial Corporation, an affiliate under the World Bank.

Taikang Life, one of the newly emerged national insurers in the Chinese market, has also sold a 15-percent stake to Credit Suisse First Boston.

But these companies are smaller than the Bank of Communications in terms of their size, turnover and total assets.

The stagnant performance of two banks listed last year, the Shanghai Pudong Development Bank and Minsheng Bank, has overshadowed the bank's ambitions for listing and cemented its desire to develop its internal strength.

Fang said the bank would not go public before it finished its marriage with foreign partners.

The company has successfully reformed its corporate structure over recent years.

"We have already selected the firm to help us evaluate our assets, and we are soon going to contract out our accounting and law services," said Fang.

Further details related to the public listing, including the time, place and whether there would be a partial or a full listing, are still being considered.

(China Daily September 25, 2001)