HONG KONG (Dow Jones)--China's Shanghai Pharmaceutical Group wants to sell a large stake to foreign buyers to fund its expansion and stave off competition from local and overseas rivals, the Financial Times reported on its Web site.

The FT, citing people close to the situation, said the state-owned company held preliminary talks with private equity groups, which likely included Carlyle Group (CAY.XX) and CVC Asia Pacific, for the sale of a stake worth about CNY2 billion to CNY3 billion.

Shanghai Pharmaceutical confirmed its intention to sell a stake, but added the process was on hold because its parent group China Worldbest was being bailed out by another state company.

However, Shanghai Pharmaceutical, which has one of the largest drug distribution networks in China, said the bail-out wouldn't change its plan to introduce foreign investors ahead of a listing planned for the next few years.

The company declined to comment on the identity of specific investors. Carlyle and CVC were unavailable for comment.