Deutsche close to first China securities JV: source

HONG KONG/FRANKFURT (Reuters) - Deutsche Bank (DBKGn.DE) has signed a deal with Shanxi Securities to set up an investment banking venture in China, paving the way for it to tap the country's capital markets as global ones remain volatile, a source with knowledge of the deal said on Friday.

Deutsche Bank, which suffered its first quarterly loss in five years in the first three months of 2008, planned to take 33 percent of the envisioned Beijing venture, the most allowed, the source with direct knowledge of the agreement told Reuters.

Beijing this year re-opened its coveted but shuttered securities industry to foreign firms after a hiatus of more than a year to let local players merge and strengthen. Several banks, including BNP Paribas (BNPP.PA), have since expressed an interest in setting up local ventures.

Chinese stock markets have shed nearly half their value this year, but foreign banks remain keen on securing a foothold there with an eye on the longer term.

UBS (UBSN.VX) (UBS.N) and Goldman Sachs (GS.N) were among the first to secure a brokerage license in China, advising on share sales by the likes of top Asian oil producer PetroChina Co Ltd (601857.SS) (0857.HK) (PTR.N) and other corporate activity.

This month, Credit Suisse (CSGN.VX) and Beijing's Founder Securities won approval to set up their own investment banking venture.

Deutsche, one of the few foreign lenders incorporated in China -- which affords them access to a wider range of businesses -- is stepping up its operations there as elsewhere it sinks into the red under the weight of global financial turmoil.

In March, it spent $552 million increasing its stake in mid-sized Chinese commercial lender Huaxia Bank (600015.SS) to 13.7 percent from 9.9 percent.

(Reporting by Edwin Chan in Hong Kong and Philipp Halstrick in Frankfurt; Editing by Anne Marie Roantree)