The World Bank's private sector lending arm, the International Finance Corp (IFC), has taken a 5 per cent stake in the enlarged share capital of Bank of Shanghai, a second-tier mainland bank.
IFC made the US$22 million acquisition to strengthen the Bank of Shanghai's capital base and help it adopt international standards and practices more easily.
It also forms part of a drive by the IFC to foster greater domestic and foreign investment in the mainland's struggling financial sector.
The IFC said yesterday the deal marked the first time it had become a shareholder in a mainland domestic bank, and it aimed to promote the Bank of Shanghai as a model for much-needed reform of the mainland's banks.
Javed Hamid, the IFC director for East Asia and the Pacific, said that it would become an example for other mainland banks.
'The investment is a way to foster the modernisation of China's domestic banking industry and encourage more participation by foreign banks,' the IFC said.
The Bank of Shanghai's main focus had been on supporting small and medium-sized enterprises and the IFC's investment would also help it become even more involved in this sector, it said.
