Deutsche Bank agrees to buy stake in Chinese bank

German banking titan Deutsche Bank has reached a preliminary agreement to spend around $200 million to acquire a 10% stake in mid-level Chinese banking institution Huaxia Bank.

The development continues an increasingly frequent trend of western finance companies buying a presence in the burgeoning Chinese finance sector through acquire stakes in local companies. In joining the race to establish a Chinese footprint, Deutsche Bank, one of the largest banking organizations in Europe, has signed an accord to purchase roughly one tenth of the $2 billion valued Huaxia. According to the Financial Times, Deutsche Bank will team up with another European financial institution, believed to be either Societe Generale or BNP Paribas, to secure a combined stake of 15%. The partner organization will pay a further $100 million for its 5% share of the deal. Currently, foreign companies can only own a maximum of 20% of a Chinese company each, with total foreign ownership in one Chinese company limited to 25%. If the Deutsche Bank's deal goes ahead as planned, Huaxia Bank will be able to offer a further 10% to overseas investors. The move is somewhat out of step with other investments by western banks. Deutsche Bank has chosen to buy into a smaller organization, while most of its rivals have chosen to pay much more for smaller stakes in China's bigger nationwide banks.