Blackstone Group plans to buy a 20 to 40 percent stake in chemicals company China National BlueStar (Group) Corp for up to $500 million, marking its first major investment in the world's fastest-growing major economy.

Blackstone, in which China's first state overseas investment agency recently bought a $3 billion stake, will pay between $400 million and $500 million for the stake in the Chinese company, a source familiar with the deal told Reuters on Thursday.

The two sides are finalizing the talks and an agreement will be signed within days, said the source, who asked not to be identified.

Executives at Blackstone and BlueStar declined to comment.

BlueStar is a unit of China National Chemical Corp, a major Chinese chemicals maker with annual sales of 30 billion yuan ($3.98 billion), it said on its Web site.

BlueStar has more than 30 subsidiaries and research institutes and holds stakes in three domestically-listed firms -- Blue Star Cleaning Co, Blue Star New Chemical Material and Shenyang Chemical Industry.

Shares in all three firms were suspended from trading on Thursday pending an announcement about their parent company.

If successful, the deal would mark Blackstone's first major investment in China where breakneck economic growth of 10 percent a year has driven up demand for everything from iron ores to plastics.

However, several high-profile acquisition deals in China planned by foreign investors have stalled amid concerns among Chinese officials that the country is selling its industrial assets too cheaply.

Another U.S. private equity group, Carlyle, has been thwarted in its attempt to buy into Xugong Group Construction Machinery Co, China's largest construction machinery maker.

And Carlyle also ran into regulatory hurdles in trying to take a stake in Chongqing City Commercial Bank, a small Chinese lender, and failed to close a deal with Chinese chemical maker Haihua Group, parent of Shenzhen-listed Shandong Haihua Co/

But other foreign investors have had a much smoother passage into the country. Goldman Sachs has taken control of China's top meat processor, Henan Shuanghui Investment & Development Co, and bought shares in top auto glass maker Fuyao.

Blackstone raised $4.13 billion in its initial public share offer in New York in June, the largest U.S. IPO since 2002.

It has taken part in some of the largest leveraged buyouts ever, including the purchase of Chicago-based Equity Office Properties Trust for $23 billion and the $17.6 billion buyout of Freescale Semiconductor. It also owns Michaels Stores and Pinnacle Foods, maker of Duncan Hines and Vlasic pickles brands.

($1=7.542 Yuan)