Japan's Kubota Corp, a top maker of farm equipment, has paid $24.85 million for a 1.42 per cent stake in Chinese diesel-engine farm machinery manufacturer Changchai Co. Kubota bought five million B shares in Changchai, giving it a strategic stake in China's largest maker of single-cylinder diesel engines. Kubota's stake was part of an offering of 100 million B shares, or 28.4 per cent of Changchai, being listed on the Shenzhen Stock Exchange. The shares were issued at $4.97 each. 'Kubota was chosen as the strategic investor because it showed the keenest interest in Changchai,' J&A Securities vice-general manager of investment banking Chen Yongchang said. The brokerage is underwriting the share sale with DBS Asia Capital and Crosby Capital Markets. Underwriters said the alliance would help pave the way for future technology co-operation between the two companies. 'The two companies have been in touch previously in the hope of possible collaboration on the technological side. The sale could further enhance that,' Mr Chen said. Trading in the B shares begins today. Changchai already has A shares listed. The company, based in Changzhou, Jiangsu province, makes diesel engines for farm machinery and machinery for processing agricultural products, primarily for the domestic market. Its products are mostly single-cylinder diesel engines particularly suitable for small-scale agriculture operations in developing countries such as China. Changchai sold more than 1.2 million engines last year and it hopes to sell 1.8 million this year. It plans to use the listing proceeds to expand production capacity to more than three million engines by 2000. The company said it would be a major beneficiary of the country's policy to modernise the rural sector. Strong interest prompted the company to issue the shares at the top end of its price range as foreign investors flocked for a slice of China's growing agri-machinery sector. Growing income and buying power in the rural sector will translate into rising demand for low-cost, small to medium-sized machines for small-scale agricultural units. Sales of small to medium-sized machinery recorded growth of more than 10 per cent between 1985 and 1994.