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SCMP Reporter

GUANGZHOU Shipyard says a rise in interest rates for long-term loans by the People's Bank of China (PBOC) will not significantly affect its profitability.

  The rise equates to an additional interest burden on the company of about 554,000 yuan (about HK$515,220) this year.

  The announcement came after the Hong Kong stock exchange sent a letter to all H-share companies and their sponsors last week to clarify whether or not Chinese enterprises would be affected by a change in borrowing conditions.

  Shanghai Haixing Shipping on Monday said that the higher rate would combine with the scrapping of a preferential rate on fixed asset investments to add 43 million yuan to current-year costs.

  Guangzhou Shipyard said it borrowed 90 million yuan in three-year loans from the People's Construction Bank of China between 1992 and 1994 for technology improvements.

    Their cost rose on September 21 to 13.5 per cent from 10.98 per cent.

  Chairman Ren Fuwei said the impact was negligible because 24 million had been repaid in the first-half.

  Interest cost would increase by 1.12 million yuan, of which 414,000 yuan would be incurred by December 20, with the remainder paid off by August next year.

  'As it is for fixed asset investment, the interest cost will be capitalised, so it will not affect the profits,' Mr Ren said. 'But the depreciation charges will be a bit higher.'   Guangzhou Shipyard's situation is different from Haixing's, which reflects the interest costs in its profit and loss accounts.

  Guangzhou Shipyard said it would also incur an extra interest cost of 140,000 yuan this year for two loans with terms of more than a year. There was no change in the 9.54 per cent rate on the company's 18 million yuan one-year working capital loan facility with the Import and Export Bank of China.

  Mr Ren said the company had not informed shareholders of the change because it considered that the extra interest cost minimal.

  Guangzhou Shipyard was confident the company would continue to receive support from banks in obtaining loans.

  'It is necessary for the PBOC to adopt a differentiation policy towards enterprises that have a different credit standing by way of issuing loan permits to enterprises,' the company said.



Yard to ride out rate rise