LONDON - HSBC Holdings and Bank of Communications (BoCom) plan to transfer their joint credit card activities in China into a new company to tap into expected strong growth in the world's most populous country.

The joint venture will extend an existing co-operation agreement between HSBC and BoCom's Pacific Credit Card unit, which has 11 million cards in issue.

HSBC, Europe's biggest bank, has been a strategic investor in BoCom since 2004 and holds a 19 percent stake.

China's credit card industry is relatively underdeveloped, with such debt accounting for just 3 percent of banks' overall loan books. Banks had issued a total of 162.6 million credit cards by the end of June, up 33 percent from a year earlier, the central bank said.

HSBC said despite growth in recent years, penetration remained low with only 0.11 cards in issue per person.

The joint venture will tap a market which is expected to see exponential growth in the coming years particularly, HSBC said in a statement. It said of 1.8 billion cards issued by 235 issuers in 2008, over 90 percent were ATM or debit cards with no revolving credit line.

The proposed joint venture, provisionally named Bank of Communications & HSBC Pacific Credit Card Co., is expected to have an initial registered capital of 2.5 billion yuan ($366 million).

BoCom will inject 2 billion yuan ($293 million) for an 80 percent stake in the joint venture, while HSBC will pay 1.16 billion yuan for its 20 percent interest in the share capital, the two sides said.

BoCom, China's fifth-largest lender, on Wednesday posted a flat quarterly net profit as lower margins offset the benefit of loan expansion. [ID:nSHA292778]

(Reporting by Steve Slater in London and Douglas Young in Hong Kong; editing by John Stonestreet)