The Bear Stearns Companies Inc. (BSC) and Eagle Investment Group announced here on Tuesday they will set up an investment alliance focusing on China's retail sector.

According to the memorandum signed by the two sides, BSC, a leading financial services firm, and Eagle, a Chinese investment firm, will each invest 250 million US dollars in a joint investment fund.

"With its tremendous success, especially in the retail sector, Bear Stearns will contribute to Eagle's success in China," Huang Guangyu, Chairman of Eagle, said. "Despite continued and rapid growth, China still has great potential in the retail sector, especially in rural areas."

"Mr. Huang is a highly respected leader in the Chinese business community and an excellent business partner," James E. Cayne, Chairman and CEO of the BSC said, "and we believe that his capabilities, BSC's solid backing and Bear Stearns Merchant Banking's strong track record it has demonstrated in private equity will make a powerful combination."

In 1987, Huang established Gome, the largest electronics retailer in China.

Under the agreement BSC will cooperate with Eagle through its private equity arm, Bear Stearns Merchant Banking (BSMB), widely known for investing in retail and consumer brands throughout the United States.

"The retail sector is one of the leading growth engines behind the economic expansion in China," John Howard, CEO of BSMB, said, "and we look forward to investing in strong brands that can benefit from our firms' combined expertise."