By Arno Schuetze and John Ruwitch

FRANKFURT/SHANGHAI (Reuters) - Chinese conglomerate HNA Group has sold part of its stake in Deutsche Bank worth around 300 million euros (£265 million) as it offloads investments to address a liquidity crunch.

The reduction from roughly 10 percent to around 8.8 percent is significant because it means HNA is no longer on a par with the Qatari royal family, now Deutsche's biggest shareholder.

The move to trim its stake in Germany's largest lender, one of HNA's highest profile overseas investments, comes as the aviation-to-financial services conglomerate faces intense regulatory scrutiny following a $50 billion acquisition spree over the past two years.

Last month, HNA told creditors it faced a potential cash shortfall of at least 15 billion yuan (£1.7 billion) in the first quarter, according to a source. HNA had declined to comment.

A spokesman for asset manager C-Quadrat, which handles HNA's Deutsche Bank shareholding, said that no further reduction HNA's holding is planned. "HNA will continue to be a significant investor in Deutsche Bank", it said.

In Germany, the stake reduction is likely to be greeted with relief by local regulators, which have been alarmed by HNA's problems and opaque ownership structure.

Financial watchdog Bafin has been conducting a probe into HNA, over whether it accurately reported its holdings when building the stake, according to two people briefed on the matter, while the Swiss Takeover Board, in a separate case, had said that HNA had provided some false information.

Although the prices at which HNA built its Deutsche Bank stake are not public, the investment has probably not been a financial success so far. Since HNA revealed an initial stake in Deutsche Bank in February 2017 the shares have lost 23 percent in value.

Deutsche Bank this month again appealed for investors to be patient after it posted its third consecutive annual loss in 2017, taking a hit from challenging markets, a drop in investment bank revenue and a U.S. tax reform, after a difficult fourth quarter.

HNA's financial woes prompted S&P Global Ratings to downgrade the credit profile of the Hainan-based group and two of its units in November, citing a "deteriorating liquidity profile" as it faces mounting debt maturities this year.

To address the liquidity crunch, HNA has been selling assets. This week it announced a $2 billion deal for two Hong Kong land parcels. Sources have said it is in talks with creditors about its outstanding loans.

Conglomerates like HNA once enjoyed government support and cheap cash as Beijing sought to push them to become global champions, but China abruptly reversed course more than a year ago as it stepped up efforts to control financial sector risk and lower debt levels across the economy.

(Additional reporting by Tom Sims in Frankfurt; Editing by Keith Weir)