BEIJING/SHANGHAI (Reuters) - A provincial real estate developer in China, Zhongtian Financial (>> Zhongtian Urban Development Group Co Ltd), unveiled a plan to acquire a stake in a local life insurance firm for as much as $4.7 billion (3.53 billion pounds), in what could be the country's second-biggest domestic equity investment this year.

Under framework agreements, Zhongtian Financial Group Co will buy a stake of between 21 percent and 25 percent in Huaxia Life Insurance from two shareholders, paying as much as 31.0 billion yuan ($4.67 billion) in cash, the Guiyang-based developer said in a filing late on Monday.

The purchase, if completed, would be the largest equity deal since Chinese elevator maker SJEC Corp's (>> SJEC Corp) 50 billion yuan purchase of anti-virus software maker Qihoo 360 Technology earlier this year, Thomson Reuters data shows.

Zhongtian, little known outside the mainland, started out as a real estate developer in Guizhou province, and has been actively expanding its presence in the financial sector.

Apart from its interests in tourism projects and urban infrastructure, Zhongtian owns 94.92 percent of ZTF Securities and 36.36 percent of Zhongrong Life Insurance.

China's life insurance sector is widely seen as a promising segment due to the lower penetration rate of life insurance products in the country. Increasing the sector's allure to foreign investors, Beijing this month said it would allow full overseas ownership of insurance firms after five years.

But the size of Zhongtian's proposed stake purchase in Huaxia has raised eyebrows in the industry. Zhongtian's comparatively small market cap of 34.6 billion yuan on the Shenzhen bourse versus the deal has also drawn sceptical looks.

"Zhongtian Financial's total market value is just over 30 billion yuan, and they are considering paying over 30 billion yuan for this equity acquisition - that's such a bold move," said an M&A banker at a major Chinese lender.

Huaxia is part of conglomerate Tomorrow Holdings controlled by Chinese-born billionaire Xiao Jianhua, whose whereabouts have been unclear for months.

There is speculation that Xiao has been caught up in Chinese President Xi Jinping's crackdown on corruption. The authorities have not commented on his disappearance.

Tomorrow could not be immediately reached for comment.

In July, sources told Reuters that Tomorrow was planning to pare back its sprawling asset portfolio that included its stake in the unlisted Huaxia.

The size of Tomorrow's stake in Huaxia is unclear. It is also not clear if it is a direct or indirect shareholder.

Zhongtian said it would buy a 20 percent stake from Beijing Qianxi Shihao Electron Technology and a 13.41 percent share from Beijing Zhongsheng Century Technology.

The two sellers could not be immediately reached for comment. Huaxia declined to immediately comment.

HUAXIA LIFE INSURANCE

Zhongtian's bid gives Huaxia an overall valuation of 124 billion yuan, putting the insurer in the league of second-tier insurers such as People's Insurance Group of China Co (>> People's Insurance Co (Group) of China) and China Taiping Insurance Holdings Co (>> China Taiping Insurance Hldgs Co Ltd).

Huaxia grabbed headlines last year when regulators cracked down on high-yield, short-term investment products such as universal life insurance products.

Huaxia's universal life insurance division recorded 138 billion yuan in premium income last year, 75 percent of its total business, official data shows.

In December, the insurance regulator suspended the firm's online insurance business and barred it from seeking approval for new products for three months.

The stake purchase in Huaxia would constitute a "major reorganisation of assets", said Zhongtian, adding the deal specifics would be based on further due diligence.

Trading in Zhongtian shares have been halted since Aug. 21 pending the announcement of an asset-acquisition plan. They last traded at 7.350 yuan, up 4 percent since the start of 2017.

(Reporting by Ryan Woo and John Ruwitch; Additional reporting be Engen Tham in SHANGHAI, Zhang Min in BEIJING and Patturaja Murugaboopathy in BENGALURU; Editing by Himani Sarkar)

By Ryan Woo and John Ruwitch