"CITIC Bank is considering a bid for Bear Stearns," Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission, the industry watchdog, told reporters.

It was the first time that a potential Chinese buyer was mentioned in connection with the future of the US financial giant, which was badly hit by a crisis in the US subprime mortgage sector.

However, an official with CITIC bank later said he was not aware of such a plan.

"This is the first time I have ever heard about such a matter," Peng Jinhui, a CITIC bank spokesman, told AFP.

China is encouraging its financial institutions to invest abroad as part of its effort to reduce excess liquidity and mitigate international pressure for the Chinese currency to rise more quickly.

In May, China Investment Corp., the country's foreign exchange investment agency, put three billion dollars into US private equity group Blackstone even before the agency was officially launched in September.

Earlier this month, China Minsheng Bank said it planned to buy 9.9 percent of UCBH Holdings Inc. for up to 317 million dollars, marking the first strategic investment by a Chinese lender in a US bank.

Bear Stearns, founded in 1923, said earlier this month it was merging two mortgage subsidiaries and eliminating 310 jobs to better deal with market conditions related to the ailing US housing sector.

It has been a major victim of the subprime crisis, which has seen Americans with patchy credit histories default on mortgage loans leading to a rising tide of home foreclosures as prices slump.

CITIC Bank is China's seventh-largest lender by assets and a subsidiary of China International Trust and Investment Corp., an investment company controlled by the government.

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