But Peter Goldman, a portfolio manager at Chicago Asset Management, which invests $500 million and owns Bear Stearns stock, said investors might be disappointed that Bear Stearns did not land a large equity investor.
"It's different than what most people were looking for. It may be a little disappointing," Goldman said. "People thought there would be a huge capital infusion, not a quid pro quo business partnership."
Bear shares fell $1.61, or 1.4 percent, to $114.80 in early trade on the New York Strock Exchange.
Opening a Door in China
However, the partnership may be helpful over the longer term in helping Bear to attract new business in China.
"China is increasingly using more sophiscated ways of addressing protectionist risk so expect to see more deals along these lines to avoid having their moves blocked by politicians," Alex Patelis, head of international economics at Merrill Lynch, told CNBC.
Under the preliminary agreement, CITIC would invest about $1 billion in Bear Stearns securities that would convert into about 6 percent of the New York-based investment bank.
Bear Stearns would buy $1 billion of CITIC debt that would over time amount to a 2 percent stake in the Beijing-based firm. Neither company could hold more than 9.9 percent of the other's stock.
"We are confident that combining our operations in Asia with CITIC Securities will greatly benefit Bear Stearns' global client base and generate substantial new revenues and growth opportunities for the firm," Bear Stearns Chairman and Chief Executive James Cayne said in a statement.
The deal is subject to a definitive agreement. The companies said they have agreed to negotiate only with each other. They also said there was no assurance a deal would be completed.
A deal needs the approval of China's State Council as well as securities regulators and shareholders.