More Foreign Banks are Making Investments in Chinese Lenders

By Elaine Kurtenbach, AP

Foreign banks are planning to take large stakes in China’s second largest bank and a mid-sized regional Chinese lender as they jockey for position ahead of late 2006, when China fully opens its markets to overseas competition.

The Royal Bank of Scotland Group PLC announced Thursday a $3.1 billion investment in Bank of China that will give the British bank control of a 10 percent stake.

RBS is contributing $1.6 billion of the investment in Bank of China, the country’s second largest bank, giving it a direct stake of just over 5 percent. But it will take control of the full 10 percent on behalf of co-investors Merrill Lynch & Co. and Li Ka-shing, the Hong Kong-based tycoon who controls the conglomerate Hutchison Whampoa Ltd.

The announcement followed weeks of speculation that RBS, Europe’s second largest lender, would take up a stake in the Chinese bank. RBS Chairman George Mathewson said the group had no plans to increase the size of its investment.

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