Cisco Capital China's first financing transaction is a multimillion-dollar leasing deal with China Development Bank (CDB).

Guan Xin, manager of the IT operation centre of CDB, said the five-year contract will help the bank save at least 10 per cent in operating costs.

"The leasing deal with Cisco will also help us decrease the management of fixed assets," she said. Under the deal, Cisco will lease all the routers and switches CDB needs.

CDB is one of the most aggressive Chinese companies in IT outsourcing.

Most of the notebook PCs and servers used at CDB are leased by manufacturers, according to Guan.

CDB usually replaces such PCs and servers every three years, which helps cut costs and ensures CDB is using the latest technology and equipment.

Cisco, which entered China in 1994, has been diversifying its approach to better tap into the Chinese market in recent years.

Cisco Capital China will serve as a "facilitator" for Cisco to clinch deals with potential customers, Lam said, adding Cisco's huge cash flow will make the firm "unmatched" in providing finance and leasing services.

Last October, Cisco launched a research and development centre in Shanghai with a committed investment of US$32 million.

In May, Cisco also launched a subsidiary, Cisco Systems (China) IT Service Co Ltd, dedicated to providing IT services.

The subsidiary is expected to provide a new revenue stream for Cisco, which previously relied largely on sales of equipment and advanced technologies such as IP (Internet protocol) telephony.

Cisco has invested more than US$600 million in Chinese start-ups, partly by partnering with venture capital.

By July 29, the company had a total cash flow of US$7.9 billion.

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