China International Capital Corp, one of China's most prominent investment banks, is in merger talks with rival China Investment Securities as CICC seeks to expand its retail footprint and pave the way for a possible mainland debut.

A merger would also mark the latest tie up between state-owned enterprises. China’s Communist party has signalled that large-scale mergers are a central element of its effort to revitalise the state sector, whose profitability trails far behind that of private firms. 

Beijing-based CICC confirmed in a filing to the Hong Kong stock exchange late on Monday that it is in talks with unlisted China Investment Securities. Shenzhen-based China Investment is fully owned by Central Huijin Investment, a unit of the country's sovereign wealth fund that serves as a holding company for shares in state-owned financial institutions. Huijin also owns 28.4 per cent of CICC.