The Taiwanese government is handing T$47.5bn (£750m) to HSBC to help it take control of a local bank, which was bailed out by the authorities just under a year ago. The UK's biggest bank is ploughing £150m of its own cash to bolster the capital of the Chinese Bank as part of the agreement reached yesterday.

The deal allows HSBC to catch up with rivals, such as Standard Chartered and Citigroup, in Taiwan, which is regarded as a crucial market because of its proximity to the fast-growing Chinese economy.

HSBC is braving the tough financial markets to proceed with the deal, although City sources noted that Asian markets had so far weathered the turmoil in the international money markets relatively well.

HSBC took part in an auction held by the Taiwanese government's Central Deposit Insurance Corporation, which took control of the Chinese Bank in January 2007. The Taiwanese bank collapsed and was taken into government hands when its parent company, the Rebar Group, ran into difficulties a year ago.

HSBC's shares closed up 8.5p at 839p last night. It has spent much of the past year battling with problems in its US operations, which was hit by the US sub-prime crisis earlier than many rivals.

The deal with Chinese Bank will give HSBC an extra 36 branches and an additional 1 million customers on top of the eight branches it has in the country, where the economy is still growing at 5% a year.