IN a bid to assure investors of its financial position, China's Tsingtao Brewery says only its surplus working capital, amounting to about 700 million yuan (about HK$641.9 million), is saved in banks as entrusted short-term loans. Tsingtao requested the suspension of its shares yesterday amid concern that it is short of funds to finance its expansion plan due to increasing lending activities to mainland enterprises. It also emphasised the loans were different from those disclosed in its 1993 annual report, which showed the company had loans receivable of 262.6 million yuan to independent enterprises. In an announcement yesterday at the request of the Hong Kong stock exchange, Tsingtao confirmed that the surplus funds, which had been earmarked for expansion projects, had been placed with banks and financial institutions in China for making entrusted short-term loans. But these were treated as 'bank deposits' in its accounts. Its public relations spokesman explained that many Chinese enterprises negotiated with banks on deposits entrusted as short-term loans in order to enjoy higher interest rates. 'However, it is the banks which will bear the risk and are the creditors, not the companies,' he said. Tsingtao also noted that such advances would not jeopardise its working capital for committed projects. The shares will resume trading today. Stock exchange executive director Herbert Hui Ho-ming said the use of proceeds by listed companies was 'a crucial item' that the exchange would look at. Tsingtao also dismissed allegations that it had not complied with its pledges on the use of proceeds in its listing prospectus. The company said it had changed its expansion plan. Instead of expanding its existing small breweries, it would develop a large-scale modern brewery and a malting factory which required investment of two billion yuan. However, the project must still secure government approval. During the transitional period, the company had set aside the surplus funds for the entrusted short-term loans. At the end of last year, Tsingtao said it had earmarked the proceeds raised from flotation to repay borrowings of 285 million yuan and US$45.39 million. It also had marked 249 million yuan for development.