Bank of America invest 2.5 billion in China Construction Bank

Bank of America announced here Friday it would invest as much as 2.5 billion US dollars in &to=http:// ' target=_blank>China Construction Bank (CCB) -- and earmark another 500 million dollars when the CCB goes public probably later this year -- for a roughly nine percent stake in the country's leading property lender.

This was the most-ever foreign investment in a Chinese company made by a single foreign company, sources say.

&to=http:// ' target=_blank>Bank of America also received an option to increase its stake in the coming few years to 19.9 percent at the price of the shares in the CCB's initial public offering, nearing the 20 percent ceiling set by China's banking regulator for investment of a single foreign bank.

The deal was signed in Beijing by Bank of America board chairman Kenneth D. Lewis and China Construction Bank chairman Guo Shuqing, reports Xinhuanet.

The partnership between the two banks shows that China's state-owned commercial banks have moved an "important" step in their joint-stock reform, analysts say.

Bank of America is also expected to be given an option to increase its investment to 19.9 per cent over the next five years as part of the deal. Foreign investors are currently allowed to own no more than 20 per cent of a Chinese bank, but that will change in 2007 when the cap will be removed and China’s $1.3 trillion market for domestic loans will be thrown wide open.

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