Jan. 4 (Bloomberg) -- Bank of Communications Ltd., part- owned by HSBC Holdings Plc, won regulatory approval to buy 10 percent of Changshu Rural Commercial Bank in China's eastern Jiangsu Province.

``It's approved,'' Bao Jian, an official at Changshu Rural's general office, said in a phone interview today. ``We haven't decided when to announce it,'' he added, declining to reveal the price of the deal.

BoCom, as the smallest of China's five major state-owned banks is known, is joining foreign counterparts including shareholder HSBC in seeking profits from serving China's 800 million rural dwellers. Chinese President Hu Jintao has made boosting countryside incomes a priority, promoting loans to farmers and raising public works spending in rural areas.

BoCom Chairman Jiang Chaoliang said on Oct. 18 the bank is considering setting up branches in less-developed areas. ``Rural areas are less developed, hence they have potential,'' he said. Chinese farmers need 20 trillion yuan ($2.75 trillion) of bank loans by 2020, the local banking regulator estimates.

HSBC, Europe's biggest bank by market value, was the first international lender to move into the vacuum created as Chinese banks closed 31,000 rural branches over the past nine years because of mounting bad loans. HSBC owns 19 percent of BoCom.

Citigroup Inc., the biggest U.S. bank, plans to set up at least 10 rural banks and loan companies in rural China, Zang Jingfan, director of cooperative finance at the China Banking Regulatory Commission, said Oct. 23.

Changshu Rural Commercial Bank was set up in 2001 by restructuring rural credit co-operatives in Changshu City, 100 kilometers northwest of Shanghai. The lender had 24.4 billion yuan of assets and an 11.1 percent capital adequacy ratio at the end of 2006, according to its Web site.

To contact the reporter for this story: Zhang Dingmin in Beijing at Dzhang14@bloomberg.net

Last Updated: January 3, 2008 22:34 EST