Bank of China has received state cash to help clear up bad debts

Bank of China confirmed on Thursday that it is talking to a number of Western banks, including UBS and Deutsche, about a strategic investment.

The bank is one of several named in a series of embarrassing corruption and embezzlement investigations.

Investors have been concerned both by the scandals and by Chinese banks' large burden of bad debts.

Most of the banks have awarded sizable loans to loss-making state enterprises for political reasons.

Cash injections

Clearing up the balance sheets is widely seen as a prerequisite for preparing the banking system for foreign competition, which China promised to allow in 2007 when it joined the World Trade Organisation.

Several banks, including Bank of China and China Construction Bank, have received big injections of state cash to help them sort out the bad debt problem.

Both are up for sale, with a view to helping them become more competitive.

But both have also been enmired in the corruption scandals, leading regulators to order them to tighten up their systems.

One recent case, in March, saw a former Bank of China employee arrested in connection with the alleged embezzlement of $6m.

And in February the chairman of China Construction Bank, Zhang Enzhao, resigned for ''personal reasons" amid reports of an investigation into alleged corruption at the bank.