updated 7/11/2005 9:50:59 AM ET 2005-07-11T13:50:59

U.S. investment bank Goldman Sachs and German financial firm Allianz are in talks to buy a stake of more than $1 billion in one of China's biggest state-owned commercial banks, a news report said Monday.

The talks with the Industrial and Commercial Bank of China are at an early stage, The Asian Wall Street Journal said on its Web site, citing unidentified sources. The report said it wasn't clear how large a stake the foreign firms would get in the bank, also known as ICBC.

A spokesman for ICBC said the bank has held talks with potential strategic partners but refused to release any details. The spokesman would give his name only as Mr. Xie.

Allianz, an insurance and banking conglomerate based in Frankfurt, Germany, that owns Dresdner Bank, refused to comment on the report.

State banks are looking for foreign partners to help them modernize operations and become more competitive as China prepares to open the industry to foreign competition by 2007 under commitments to the World Trade Organization.

Bank of America agreed last month to pay $3 billion for a 9 percent stake in China Construction Bank — another of China's "big four" state commercial banks.

Foreign investors in Chinese banks include HSBC Plc. of Britain, Singapore's Temasek Holdings and American financial firm Newbridge Capital. Citigroup and Dutch lender ING Groep NV say they are looking for Chinese partners.

Goldman Sachs already has a 33 percent stake in a Chinese securities firm, Gao Hua Securities Co.

ICBC is China's biggest commercial bank by deposits. But it also is the most financially troubled of China's major state-owned banks, which are struggling to shed billions of dollars of unpaid loans to state companies. The government announced in April that it would inject $15 billion  into ICBC as part of efforts to turn it into a profitable, free-standing competitor.

ICBC and other Chinese banks also are struggling to modernize their accounting, plugging gaps that have permitted massive thefts through phony loans and other schemes.

Other state-owned banks have announced plans to sell shares to private investors in China and abroad. The official Xinhua News Agency said in April that regulators believe ICBC is "basically ready" to do the same, but no details have been released.

ICBC announced a venture in March with American Express Co. to issue credit cards.

In January, dozens of government officials and others were arrested on charges that they tried to steal 7.4 billion yuan ($900 million) from ICBC through fraudulent loans.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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