By Robert Peston

BBC business editor



Barclays is attempting to raise enough finance to take over ABN

If it succeeds and if Barclays acquires ABN, the Chinese state would emerge with a shareholding of around 7% in the enlarged group.

The Asian cash will be used to help Barclays increase its takeover bid for ABN to around £50bn.

A group led by Royal Bank of Scotland (RBS) is also vying for the Dutch firm.

Overseas investment

Banking sources have said that Barclays' Asian deal was being negotiated overnight.

A smaller stake of about 3% would be taken by Temasek, the investment arm of the Singaporean government.

If Barclays fails to buy ABN, the newly formed Chinese investment authority and Temasek would take smaller stakes in the British bank.

The Chinese and the Singaporeans are paying around 740p per Barclays share, above its closing market price on Friday night of 713.5p.

Ambitious

The deal was arranged by the leading US private equity house, Blackstone - which recently sold a £1.5bn stake in itself to the Chinese state.

The Chinese state has $1.2 trillion of foreign exchange reserves to invest, much of which has been placed in US Treasuries or government bonds.

China recently signalled it would be taking a more imaginative and aggressive approach to how it invests hundreds of millions of dollars, including buying significant holdings in overseas companies.

The deal with Barclays under negotiation would be the most ambitious manifestation to date of its new boldness as an investor.

The idea that the Chinese government could end up with an influential stake in such an important European financial institution as the merged Barclays/ABN could prove controversial.

Some Barclays shareholders may be concerned that the Chinese are buying the shares without them being offered to existing shareholders.

Barclays will also announce that it will buy in several billion pounds of its own shares.