NICOLA Sturgeon has signed a potential multi-billion pound investment deal with a firm owned by a Chinese construction giant implicated in "gross corruption" on an industrial scale.

Major concerns have been raised after evidence emerged to suggest that China Railway Group Limited (CRG) has been guilty of paying huge bribes to government officials in China to secure lucrative public contracts over several years with the full knowledge of its management.

China Railway No. 3 Engineering Group Co., Ltd, (CR3) one of two Chinese construction and infrastructure giants to sign a memorandum of understanding with the Scottish Government potentially worth £10 billion, is a wholly-owned subsidiary of the company. Official reports show that the parent company holds a 100 per cent stake and complete control over CR3.

Norway's giant oil fund, a model the SNP has said an independent Scotland would adopt, ditched a £26 million stake in CRG after its ethics council launched an investigation and concluded that there is an "unacceptable risk that the company is involved in gross corruption".

The Scottish Government published its memorandum of understanding with the companies on Sunday following claims that the deal had been signed at Bute House in secret with details of its existence only emerging in the Chinese media.

Willie Rennie, the Scottish Liberal Democrat leader, said: "People will be asking why the SNP are getting into bed with a firm whose parent company seems to have been blacklisted by Norway on grounds of rampant corruption. This raises big questions over whether proper due diligence was done before the First Minister put pen to paper. Failing to look into the backgrounds of these businesses would have been naive at best.

"We know that Alex Salmond made a habit of deferring to China on issues like the Dalai Lama. It seems that Nicola Sturgeon is following his example. We need to understand what level of scrutiny this deal received before it was signed.

"The SNP have repeatedly used this Norwegian fund as a model for Scotland to follow. If they won’t do business with the parent company due to evidence of bribery and kickbacks, shouldn’t have that set alarm bells ringing?"

A lengthy report published by the Norwegian ethics council in October 2014 found that it is likely that China's railway minister was bribed to secure contracts for CRG, and that there was an "unacceptable future risk of corruption". Civil servants were likely to have been paid off for railways and housing projects - two areas in which the Scottish Government agreement highlights as possible areas of cooperation with the subsidiary.

CRG was implicated in one of China's largest corruption cases, uncovered after 40 people were killed in a crash between high-speed trains in 2011 in the industrial city of Wenzhou, the document reveals.

One official received £4m in bribes from companies including CRG to win contracts while China's railways minister was sentenced to death, later commuted to life imprisonment, for taking £5.4m in bribes. He had awarded a substantial number of contracts to CRG during his time in office.

In another case, CRG paid £1.5 million worth of illegal payments to civil servants to win contracts for a £66m housing project, with the company still run by bosses who were in place when bribes that were uncovered were paid out.

The Scottish Government agreement with the subsidiary and another Chinese company, SinoFortone, sets out the "basis and general principles for initial discussions" on how the firms can "develop and fund major infrastructure projects in Scotland."

It adds: "The parties will be mutually supportive of each other in working towards this purpose and seek to develop a relationship that could lead to a program of investment into Scottish priority projects and infrastructure to the value of £10bn."

A spokeswoman for the First Minister said on Sunday that it was a agreement to have discussions that could lead to investment and create jobs in Scotland but it is not legally binding and no public cash had been committed.

Kezia Dugdale, the Scottish Labour leader, raised questions over whether the Scottish Government deal would hit domestic firms. She said: "We're talking about £10 billion of potential investment. The public have a right to know the detail of this. I want to know who was in the room, what's in this deal, what are the caveats or catches. Are they talking about Chinese steel for Scottish infrastructure right at a time that thousands of jobs across the UK hang in the balance? This matters, and the SNP have to reveal all of the details."