Updated: 2005-12-26 12:56
Singapore's state-run investment agency Temasek Holdings has won approval from China's central bank to buy a 5 percent stake in Bank of China, half what it had sought, the Caijing business magazine said in its latest edition published on Monday.

Temasek agreed in September to buy 10 percent of China's third-largest lender but the bank's biggest shareholder, Central Huijin Investment Co., blocked the deal amid concerns Beijing has been selling off chunks of its banks to foreigners too cheaply.

"Temasek's investment in Bank of China has won approval, but the size of the investment has been reduced to 5 percent from the original 10 percent," the Caijing said, citing unnamed government sources.

Under the approved plan, Temasek would buy 5 percent in new shares from Bank of China, scrapping its earlier bid to buy another 5 percent from Central Huijin, the central bank's investment agency that manages foreign currency funds injected into the nation's big state banks.

"Bank of China will implement its stock listing plan at the fastest possible speed after getting the investment," the magazine said.

Bank of China plans to list its shares overseas next year.

The bank had already won approval to sell a 10 percent stake to a consortium led by Royal Bank of Scotland for $3.1 billion. The other strategic investors are UBS and Manila-based Asian Development Bank.

China's national welfare fund had been given the green light to invest 10 billion yuan in each of the country's two largest commercial banks -- Industrial and Commercial Bank of China and Bank of China, state media have reported.

The welfare fund's investment follows a backlash in China against inroads by foreign institutions into China's banking industry.

Temasek already owns 6 percent of China Construction Bank Corp., the second-biggest bank, and 5 percent of privately owned Minsheng Banking Corp..

Central bank governor Zhou Xiaochuan has recently defended the strategic sales as necessary to bring cash and expertise into an industry saddled with bad loans and poor management practices that are a legacy of decades of politically directed lending.

Banking regulator Liu Mingkang has also rejected charges that Beijing was selling off stakes too cheaply or giving foreign banks too much influence over the economy.