United States banking giant Citibank has emerged as the front-runner to buy a minority stake in the Bank of Communications, the China's fifth-largest commercial lender. A mainland newspaper report yesterday said Citibank was favoured to win the race against other international banks to become a strategic partner of the Shanghai-based lender. This would enable it to gain a strong foothold on the mainland before China's entry into the World Trade Organisation. 'Several foreign financial institutions showed keen interest in incorporating with us after we announced a stake-selling plan,' sources at the mainland bank said yesterday, according to the Shanghai Daily. 'Among would-be partners, Citibank is likely to win,' the paper reported. Last month, the Bank of Communications announced that it would invite at least two foreign financial institutions to take a combined strategic stake of about 15 per cent to help bolster its capital base and management skills. It is hoped the move, which has already won regulatory approval, will help the bank become more competitive as China further opens its market to foreign participation. The paper also quoted Bank of Communications officials as saying the strategic partnership would be a step towards a listing on the domestic stock market. The deal would make the Bank of Communications the largest state bank to have a foreign investor. Other smaller banks with foreign investors include Bank of Shanghai and Xiamen International Bank. A partnership with the Bank of Communications would give the US lender a prime position in the mainland's potentially lucrative, but highly competitive banking sector. China's progress towards admission to the WTO has effectively set a timetable for opening the banking market. Citibank is part of Citigroup, one of the largest banking groups in the world. With operations in 100 countries, Citigroup supplies a full range of services to 120 million clients, including consumer and investment banking, insurance, securities brokerage, private banking and asset management. Beijing has agreed to allow foreign banks to conduct yuan business with Chinese firms two years after WTO accession and with individuals after five years. Chan Tze-ching, country corporate officer for Citibank, declined to comment yesterday on whether the bank's bid was likely to be accepted by the mainland bank. He confirmed that Citibank was looking for mainland strategic partners to expand its business in China and was in talks with the Bank of Communications about possible co-operation. He said that could include equity investment or formation of a new joint venture between the two banks. Overseas banking institutions have long complained that the People's Bank of China, the central bank, had applied strict restrictions on the opening of branches on the mainland, preventing them from competing against domestic players with huge networks across the country. Only overseas banks with assets exceeding US$20 billion are allowed to open branches in China. But according to the Shanghai Daily, the central bank is considering lowering the threshold. An official at the Bank of Communications said yesterday that many overseas banks had expressed interest in being its strategic partner, but no decision had been made. 'That will take quite some time,' he said. 'We have to hire auditors and investment banks to evaluate assets before looking for foreign investors.' In the first half of the year, the Bank of Communications made a profit of 26 billion yuan (about HK$24.36 billion) from its business on the mainland, up 50 per cent on a year earlier, according to the mainland paper. The bank, which has a strong presence in Shanghai, has already unveiled plans to seek a domestic listing, joining only a handful of mainland banks with minority shares listed on the mainland exchanges. China has three listed banks - Shanghai Pudong Development Bank, Shenzhen Development Bank and China Minsheng Bank. The Bank of Communications' assets totalled 600 billion yuan at the end of last month, Shanghai Daily said. According to Mr Chan, many commercial banks were inviting foreign banks to become their strategic equity partners to increase their competitiveness in the post-WTO period. The paper named Shanghai Pudong Development Bank as one known to be seeking foreign partners. The bank, the largest of the three listed in China, has stated its intention to buy a bank in Hong Kong.