HSBC Holdings could raise 50 billion yuan ($7.3 billion) in a Shanghai listing next year as it vies to be one of the first foreign firms to list in China, according to people familiar with the matter.

HSBC, which reported a better than expected $5 billion half-year profit on Monday, said it wants to list but has yet to mandate investment banks for the planned flotation. HSBC said it has not decided the size of the offering while the timing is subject to regulatory approval.

HSBC, the world's biggest bank outside China by market value with a market capitalisation of over $184 billion, says it sees the Shanghai flotation as a way to accelerate its growth there at a time when international rivals have retreated.

While the financial impact of an actual listing may be negligible, we believe the branding/advertising/positioning advantages of being one of the first foreign listed banks in China could be significant, given the size and growth prospects of China's banking and consumer financial services market, Goldman analyst Roy Ramos said in a recent note.

HSBC has good Chinese ties.

It was the first foreign bank to raise 1 billion yuan in the so-called Panda bonds, the yuan-denominated bonds, in Hong Kong in June.

Its top three Chinese investments -- a 19 percent stake in Bank of Communications, a 16.8 percent stake in Ping An Insurance and a 12 percent stake in Industrial Bank, rose in value by $8 billion in the first half to $22.5 billion. It only invested $4.5 billion in the trio.

Bank of Shanghai, in which HSBC has an 8 percent stake and the country's biggest city commercial bank, has hired Goldman Sachs Gaohua Securities to advise on a 10 billion yuan initial public offering.

HSBC, the biggest foreign operator in China, said it is on track to increase its branches in China to 100 by the end of 2009, from 87 now.

Its mainland China business made a $752 million first-half profit, accounting for 15 percent of the group total.

However, plans for a Shanghai listing would have to negotiate local obstacles.

Beijing is unlikely to approve HSBC's Shanghai listing ahead of the flotation plans of China Mobile and CNOOC, one source familiar with the matter said.

But once they clear with the regulator, raising 20 to 50 billion yuan in China is easy, the person said.

Although the initial public offer market in Europe remains largely shut, China State Construction Engineering Corp (CSCEC) raised 50.2 billion yuan last month in the world's largest IPO this year.

The CSCEC deal, arranged by China International Capital Corp., was more than 35 times oversubscribed with China's stock market .SSEC surging over 80 percent so far this year.

China and Britain agreed in May to prioritise opening China's stock markets to foreign companies. But one obstacle is the yuan, which is not freely convertible, so firms would face difficulty in switching listing proceeds into other currencies.

In the case of HSBC, however, the proceeds can be used for its expansion within China, the sources said.

($1=6.831 Yuan)

(Additional reporting by Steve Slater; Editing by Greg Mahlich)

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