Bank of America announced Friday it would invest as much as 2.5 billion US dollars in China Construction Bank (CCB) -- and earmark another 500 million dollars when the CCB goes public 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.

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.

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.

China is in the midst of overhauling its state banks ahead of the World Trade Organization-mandated opening of the financial market to foreign rivals by the end of 2006.

By establishing partnership with and resorting to help from more sophisticated foreign banks, Chinese banks hope to streamline their operation.

In line with their agreement Bank of America would provide " strategic assistance" for the CCB in many areas, including corporate governance, risk management, information technology, financial management and human resources management.

The third-largest US banking group will hold a seat in the CCB's board of directors and send about 50 people to the CCB to provide consultancy services.

Source: Xinhua