UPDATE 1-Digital China to spend $66 mln on Japan IT firm

* Digital China, affiliate may take 40.9 pct in SJI

* Move latest M&A by China electronics firm

* Digital China CEO says more deals could come

(Adds background, executive comment)

TOKYO, Nov 4 (Reuters) - Digital China Holdings (0861.HK) and an affiliate will invest up to 6 billion yen ($66 million) in Japanese system developer SJI Inc (2315.Q), underlining the growing appetite for overseas acquisitions among Chinese firms.

Digital China, an information technology distributor unit of Legend Holdings [CNASCA.UL] -- also the parent company of PC maker Lenovo (0992.HK) -- will take a maximum 40.9 percent stake through the deal, along with Japan-based affiliate King Tech Service, SJI said on Wednesday.

The move, aimed at bolstering Digital China's advanced systems technology, will also help SJI expand its sales network in China and tap growing demand, SJI said.

The deal is one of a growing number from China's electronics firms, many of them cash rich on growth from their home market, as they look for expansion abroad.

Earlier this year, Suning Appliance (002024.SZ) agreed to pay 800 million yen for 27.4 percent of Laox (8202.T), a loss-making Japanese electronics retailer. [ID:nPEK126668]

In May, leading Chinese appliance maker Haier bought 20 percent of New Zealand-based whiteware maker Fisher & Paykel Appliances (FPA.NZ) for about $50 million.

Chinese firms have taken the relatively cautious approach, buying minority stakes in companies for smaller sums rather than purchasing them outright, after being burned in several larger acquisitions earlier in the decade.

Digital China will buy shares in a private placement or stock warrants, it said. Through the capital tie-up, Digital China aims to gain access to technology to win more orders from Chinese banks, communications firms and government entities.

More overseas tie-ups could come, chief executive Guo Wei told reporters, declining to say if any talks were in progress.

"The Chinese market is growing rapidly, outstripping our ability to provide adequate systems and services," Guo said. "We would be fortunate if we could find more partners to help us grow in IT services in medicine, power systems or in insurance."

SJI, whose shares jumped 10 percent on Wednesday, aims to boost its earnings by expanding its sales network in China, where demand for systems development is growing quickly with the economy. (Reporting by Mayumi Negishi in Tokyo and Doug Young in Hong Kong; Editing by Hugh Lawson and Dan Lalor) ($1 = 90.33 yen)