Pan Guang, the group's director of European and Asian Studies, said yesterday that it was creating a bank to fund projects in member countries that would be similar to the ADB.

The bank's purpose would be to give economic muscle to the organisation and encourage private firms to put money into countries where they have been reluctant to invest.

'The capital will come initially from the member governments but then from companies, like the big Chinese oil firms. It will be open to outside capital, from the European Union and Japan,' he said, speaking at the Euro-China Forum conference.

'It will be profit-making and fund projects like roads, pipelines and railways, like one from Xian to Samarkand via Dunhang, Urumqi and cities on the old Silk Route.'

The leaders of the six countries are likely to agree on the details of the new bank at their summit in Bishkek in September.

Mr Pan said several cities were fighting for the right to be the headquarters of the bank, with Shanghai among the front runners.

The co-operation body was founded in Shanghai but its secretariat is based in Beijing as the Central Asian members have no consulates in Shanghai but embassies in Beijing.

Beijing is eager to buy more oil and gas from Russia and Central Asia to offset its dependence on crude from the Middle East.

But Chinese firms are reluctant to invest in Russia and Central Asia. They complain about a poor legal system, arbitrary price changes, undisciplined workers, bad payment records and the inability to enforce contracts. The production cost of oil in Siberia and Kazakhstan was several times more than that in the Middle East and Sudan.

Capital from a state-backed bank could encourage them to take a second look.