HONG KONG (MarketWatch) -- Private-equity buyout firm Blackstone Group is closing in on its first direct investment in China, a $400 million stake in state-owned chemical company China National BlueStar Group, according to a media report Tuesday.

The deal could see Blackstone take between a 20% to 40% stake in BlueStar, according to a report by The Wall Street Journal Asia, which cited unidentified managers of private-equity funds operating in China.

Beijing-based BlueStar, a subsidiary of state-owned China National Chemical Corp., operates three publicly traded subsidiaries, the report said.

The stake is a first for Blackstone. In June, Blackstone solidified closer working ties with the mainland when a fund controlled by the Chinese government invested $3 billion in the fund shortly before its initial public offering.

Taking stakes in Blackstone is widely viewed as Beijing's way of building up an understanding of how private-equity funds work, insight that could be useful as China aggressively seeks out investment opportunities for its growing cash pile, the Journal reported.

BlueStar has not finalized any deal with Blackstone and is believed to be entertaining offers from other bidders, the Journal reported, citing an unidentified BlueStar spokeswoman.

Private-equity firms have encountered difficulties in sealing Chinese deals that entail gaining control of companies in heavy industry. Washington-based Carlyle Group recently downsized its plan to purchase a controlling stake in Xugong Group Construction Machinery Co, agreeing to take a non-controlling 45% stake. The deal has yet to be approved by regulators.