The national welfare fund is in talks to invest between US$700 million and US$800 million in the country's largest bank, Industrial and Commercial Bank of China (ICBC), the China Securities Journal said last Friday.

The paper also said the fund was interested in taking a stake in the Bank of China (BOC), but uncertainties surrounding a strategic investment in BOC by Singapore state investment agency Temasek Holdings means that plan would not be finalised quickly.

The newspaper did not identify the source of its information.

ICBC is planning an initial public offering outside of China next year, and has already signed a deal in principle to sell a 10 percent stake to Goldman Sachs' private equity arm, European insurer Allianz AG and American Express Co. for more than US$3 billion.

BOC, the country's third-largest bank, is also planning to float shares to foreigner investors next year and has lined up Asian Development Bank, Royal Bank of Scotland Group Plc., UBS and Temasek, which together plan to take a 24 percent in the bank.

However, the deal has yet to be cleared by Central Huijin Investment Co., BOC's major shareholder, and by the China Banking Regulatory Commission (CBRC).

BOC said earlier this month that it still hopes to win approval for Temasek to become a strategic partner.

China's largest State banks are planning IPOs and enlisting strategic foreign investors to bring cash and badly needed expertise ahead of the opening up of China's domestic banking market to foreign lenders in late 2006.

Official media have that the fund had expanded to 191.7 billion yuan by the end of September this year, with nearly half of its value held in bank deposits. The fund has also invested in domestic stocks and bonds.

The fund was set up in 2002 to manage a grossly under-funded pension system, and has been given the go-ahead by the government to invest overseas.

(Shenzhen Daily November 21, 2005)