SHANGHAI - U.S. bank JPMorgan has agreed to set up an investment banking venture with China's First Capital Securities this year, Caijing magazine reported on Thursday, citing an unidentified investment banking source close to the deal.

JPMorgan has signed memorandum of understanding (MOU) with First Capital to set up the venture, after four years of talks with China's Liaoning Securities and Bohai Securities collapsed, the Chinese-language publication said on its website.

A JPMorgan representative in Hong Kong declined to comment on the matter.

Foreign investors are allowed to hold up to one-third of a Chinese securities venture, which would be granted a licence to underwrite share sales by domestic companies, the article said.

First Capital, founded in 1993 and based in the southern Chinese boomtown of Shenzhen, near Hong Kong, was China's 33rd largest brokerage by investment banking revenue in 2009, Caijing said.

JPMorgan China Chief Executive Officer Fang Fang told Reuters on Tuesday that the company was looking to establish a securities joint venture in China as soon as possible, joining rivals such as Goldman Sachs and UBS  which had already set up China ventures in recent years.

In China, JPMorgan already has joint ventures in the fund management and futures businesses.

A securities venture would help it to tap expanding opportunities from planned reforms and innovations in China's brokerage sector, including a landmark stock index futures scheme due for launch next month. ($1=6.83 Yuan) (Reporting by Samuel Shen and Edmund Klamann)