Malaysia has awarded a commercial bank license to Industrial and Commercial Bank of China, the country's biggest bank, Malaysia's central bank said on Friday.

The announcement followed a bilateral agreement this month between the China Banking Regulatory Commission and Bank Negara Malaysia when Chinese President Hu Jintao visited the Southeast Asian nation last week.

This is the first time Malaysia is giving a banking license under a bilateral agreement, Central bank Governor Zeti Akhtar Aziz told reporters earlier on.

Malaysia is fighting for scarce foreign direct investment and has slipped behind regional peers such as Indonesia and Thailand in the race for investment.

Prime Minister Najib Razak, who took office this year, said in April his government will award two new commercial licenses this year to foreigners, two new Islamic banking licenses and up to further three commercial bank licenses in 2011.

The central bank said the license that ICBC receives was separate from the new licenses that will be issued under the April measures.

This license is part of a very limited number of banking licenses that Malaysia may issue from time to time under a bilateral arrangement, Bank Negara Malaysia later said in a statement.

(Reporting by Soo Ai Peng and Royce Cheah; Editing by Niluksi Koswanage)

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