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Why foreign banks pay over the odds for a China foothold

If markets are spooked by fears of bad debts in China's banking system, why are foreign banks still willing to pay premium prices to gain access to the mainland?

Singapore's OCBC announced Monday that it was in exclusive talks to buy Hong Kong bank Wing Hang, Reuters reported. However, the estimated price tag of around $5 billion — slightly less than two times its book value – has raised concerns that it is paying over the odds for the lender. Most mainland-listed banks trade at less than one times book value.

(Read more: New year, new woes for China stocks)

But the pricing of Hong Kong's local banks isn't likely to come down anytime soon.

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