UPDATE 1-China's Huijin says to participate in bank fundraising

* Huijin says banks' fundraising important to stability

* Huijin to support cut in banks' divident payout ratio

* ICBC, BOC, CCB say to raise up to $20.5 bln in total (Adds background, details)

By Samuel Shen and Jacqueline Wong

SHANGHAI, May 4 (Reuters) - China Central Huijin Investment Ltd., the domestic arm of China's sovereign wealth fund, said it would actively participate in fundraising plans by Industrial and Commercial Bank of China (ICBC) (601398.SS) (1398.HK), Bank of China (601988.SS) (3988.HK) and China Construction Bank (CCB) (601939.SS) (0939.HK).

China's top three listed banks have in recent months announced plans to raise up to 140 billion yuan ($20.5 billion) in total by selling bonds and shares, joining rivals in a rush to replenish capital depleted by last year's lending spree.

"We think that fundraising plans by big commercial banks are highly important to maintaining stability of the capital markets and promoting healthy development of the banks," Huijin said in a statement dated April 30 and posted on its website.

Huijin said it would also encourage the banks to supplement capital through internal growth, and would support their plans to cut the dividend payout ratio to 45 percent from 50 percent.

ICBC, the world's most valuable bank by market capitalization, said in March it would sell up to 25 billion yuan of convertible bonds in Shanghai, and will seek shareholder approval to sell additional H shares in Hong Kong.

Bank of China plans to sell as much as 40 billion yuan worth of bonds convertible into Shanghai-listed A shares, and may also sell H shares. CCB said on April 29 that it planned to raise up to 75 billion yuan via a rights issue.

($1=6.83 Yuan) (Reporting by Samuel Shen and Jacqueline Wong; Editing by Ken Wills)