In 2005, Bank of America (NYSE: BAC) bought a 9% stake in China Construction Bank, the second largest bank in China. The investment amounted to about $3 billion. The deal created a strategic relationship, with Bank of America providing its expertise on consumer banking, credit cards, risk management and so on.

With the continued growth in China, the deal has worked quite well. Actually, this week Bank of America announced that it is upping its stake to 10.8%. This means that the company had to write a check for $1.86 billion, even with a juicy 64% discount on the share price.

Keep in mind that Bank of America's investment is now worth $21.4 billion because of the appreciation in China Construction's stock price, whose shares trade in Hong Kong.

Now, with the slowing US economy and the continued credit crunch, I'm sure Bank of America will want to start taking some profits, which will boost capital and put less pressure on the dividend. The lock-up on the shares expires in October 2008.

But Bank of America needs to tread carefully. The fact remains that China is critical for the growth of the company. And, of course, it is important that there is a harmonious relationship with the Chinese government.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.