AN official at China's Qingdao Brewery, producer of Tsingtao beer, warns that Hongkong's frenzy for new China stocks could jeopardise the ability of Chinese investors to participate in the company's mainland share flotation. The factory plans to list simultaneously on the stock exchanges of Hongkong and Shanghai as early as May. The official said preparations were proceeding smoothly, but in a reference to recent cases of heavy oversubscription of new China-play listings on the Hongkong exchange, he noted there was concern that the issue would be ''too hot'' in Hongkong and would price Chinese investors out of the Shanghai listing. Following the recent appointment of international accounting firm Arthur Anderson to audit the brewery's accounts in preparation for listing, a merchant bank would now be appointed to manage the flotation, on February 20, he said. Seven merchant banks - shortlisted from a field of 30 which had submitted proposals - will meet company officials next week before a decision is made. The 90-year-old company, located in the coastal city of Qingdao in the northern province of Shandong, hopes it be the first among nine state-owned enterprises anointed by China's State Council to list in Hongkong. It is also considering a later listing in New York or London. China's biggest brewery - the lasting legacy of Qingdao's 16-year German occupation which ended in 1914 when the city fell to Japanese troops - planned to raise up to one billion yuan (about HK$1.34 billion) through offering 10 per cent of its share capital to the public, the official said. Mr Li Yuming, who is overseeing the listing initiative, said that under the plan for restructuring the shareholding system, its 2,500 employees would receive up to 10 per cent of the share capital in a bid to encourage loyalty and efficiency. The funds raised would be used to expand production from a gross output of 100,000 tons per year to 300,000 tons in 1995, but even this would not be enough to meet demand, Mr Li said. There are also plans to set up a branch factory in nearby Laoshan, home of the bottled mineral water of that name which is a key ingredient of Tsingtao beer.