The state-owned Bank of China on Thursday said it has signed a financial services deal with the wholly owned financial subsidiary of Swedish truck manufacturer Volvo AB.

According to Dow Jones, citing a statement from the bank, under the agreement, the bank and its branch and subsidiary companies will provide Volvo (China) Investment Co. services including long and short-term loans, letters of credit and settlement of foreign exchange.

The statement reportedly said that Bank of China will also issue loans for Volvo’s China-based dealerships as well as finance consumer purchases of Volvo construction vehicles, buses and trucks under the brand names Volvo, Renault and Mack.

Dow Jones noted that Volvo AB bought the truck business of France’s Renault, Renault VI/Mack, in 2001 and that the agreement highlights both a move by China’s large state-owned commercial banks into new revenue streams, as well as the eagerness of foreign vehicle manufacturers to tap the booming domestic market.

The report said China’s banks are scrambling to diversify revenue sources and expand and solidify their financial services market share ahead of a World Trade Organisation agreement-mandated full opening of the bank sector to foreign competition at the end of 2006 – China entered the global trade body in December, 2001.

Dow Jones said foreign manufacturers are forming a new generation of joint venture vehicle finance companies made possible by new regulations issued by China’s bank regulator late last year.

The new firms will enable buyers to arrange dealership level vehicle financing that will likely provide a further boost to already strong domestic demand, the report added.