After selling one-third of its stake in China Construction Bank to raise needed capital, Bank of America appears to have some regrets. Today, news reports indicate Bank of America (BAC) plans to formally apply to Chinese banking regulators for a local incorporation license within the next few months.

Bank of America exited its retail banking business when it partnered with China Construction Bank four years ago. As part of that agreement, it can't re-enter the retail banking business in China. So, instead, reports indicate that it will focus on corporate lending and investment banking, as well as providing wealth management services for rich Chinese customers.

In order to provide a full range of investment services, including underwriting shares and bond issues for Chinese companies, Bank of America likely will be required to team up with a Chinese partner. But reports indicate Bank of America wants to set up a wholly owned banking unit. Only Goldman Sachs (GS) and UBS (UBS) have management control of their China investment-banking ventures.

Since China opened its banking industry for full foreign competition at the end of 2006, 28 foreign banks have set up operations in China, including HSBC (HBC) and Citigroup (C). Currently seven foreign investment banks have set up brokerage joint ventures in China, including Credit Suisse Group (CS), Deutsche Bank (DB), Morgan Stanley (MS) and Japan's Daiwa Securities.

So far there have been no comments on the amount Bank of America will commit to the investment. How could Bank of America have enough cash to invest in a new venture when it needed to raise $33.9 billion of capital just last year, forcing it to sell its stake in China Construction Bank? It also announced recently that it plans to shrink its 6,109-branch network in the next three to five years. Is Bank of America paying for expansion in China by reducing its work force in the U.S.?

Lita Epstein has written more than 25 books including Reading Financial Reports for Dummies and Trading for Dummies.

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