BEIJING, Jan. 27 -- U.S. investment bank giant Merrill Lynch is on the verge of joining global rivals Goldman Sachs and Morgan Stanley in setting up a China joint venture to underwrite domestic stock and bond deals.

    Merrill chief financial officer Ahmass Fakahany said the firm was in talks with Chinese brokerage Huaan Securities, which said it had 26 branches and 800 employees in cities including Beijing and Shanghai at the end of 2003.

    A Merrill spokesman in Hong Kong declined to comment and a Huaan executive only said talks were ongoing and the firms would make a joint announcement at some point. The China Securities Regulatory Commission declined to comment.

    Credit Suisse First Boston, Citigroup and UBS are among the foreign firms interested in a Chinese joint venture to offer local investment banking services to companies in an economy that grew 9.5 percent last year.

    French banks BNP Paribas and Credit Agricole already have investment banking joint ventures, while Morgan Stanley set up its partnership a decade ago.

    The Wall Street Journal on Wednesday said the pair had agreed to a deal in which Merrill would take a 33 percent stake, the maximum allowable under Chinese law, for an undisclosed amount.

    The agreement would be announced Thursday, the newspaper said. Last month, Goldman said it had won approval from China¡¯s securities regulator to set up an investment banking joint venture called Goldman Sachs Gao Hua Securities, in which it will own 33 percent.

    Gao Hua was set up by veteran investment banker Fang Fenglei and Legend Holdings, parent of China¡¯s biggest computer maker Lenovo Group.

    Goldman is lending Fang about US$100 million to set up Gao Hua and another US$30 million to capitalize the investment bank.

    Morgan Stanley was the pioneer in the market, setting up China International Capital Corp., which has become one of the mainland¡¯s biggest arrangers of stock and bond offerings.

    (Source: Shenzhen Daily/Agencies)