The strategy worked.

Last month, Beijing agreed to his proposal to float Denway in the territory and the offering took the market by storm, being oversubscribed a record 657 times.

However, that is probably the last time mainland enterprises will be able to gain a back-door listing. In December, China Securities and Regulatory Committee announced: ''No mainland-owned company is to launch an overseas listing without a permit from the committee.'' Mr Xie, who is an executive director at Denway, said: ''Our [overseas] listing plan came just before the central government's [scheme to float mainland companies overseas], so Beijing did not know how to . . . . [handle us].'' Although the battle to bring Denway to Hongkong was a hard-fought one, the triumph on the stock market vindicated Mr Xie.

Guangzhou Auto started to manufacture coaches in 1981, and in 1985 set up a joint-venture, Guangzhou Peugeot. The company is one of the six car manufacturing bases approved by Beijing.

Guangzhou Auto holds a 46-per cent stake in Guangzhou Peugeot, with 22 per cent owned by Peugeot France, 20 per cent by CITIC, eight per cent by International Finance Corporation and four per cent by Banque Nationale de Paris.

At present, Guangzhou Peugeot is Guangzhou Auto's biggest operation, with the venture generating 90 per cent of Guangzhou Auto's total profits.

Last year, profits were $129 million on a turnover of $2 billion. In 1989, turnover was $789 million with profits of $115 million.

The plan to list was put to the Guangzhou authorities by Mr Xie in February 1992, after paramount leader Mr Deng Xiaoping's call for the speeding up of economic reforms.

The proposal was then put to Mr Li Guixian, governor of the People's Bank of China, at an unofficial meeting in March.

His support led Guangzhou Auto to institute its restructuring.

The company was initially held by a Guangzhou-owned enterprise, Jinda Auto.

In May last year, Weida Machinery was set up in Guangzhou by Jinda and Yue Xie, a Guangzhou-owned company but registered in Hongkong. Weida, 75-per cent owned by Jinda and 25 per cent by Yue Xie, acquired Guangzhou Auto - Weida's only operation - and Guangzhou Auto officially became a foreign joint-venture company.

Jinda and Yue Xie set up Denway Investment in Hongkong in November. Jinda holds 75 per cent and Yue Xie the remainder. Denway acquired 95 per cent of Weida, with Jinda holding five per cent. Denway's only operation is Guangzhou Auto.

Beijing learned of the plan to list in December and asked Mr Xie to provide details immediately.

Mr Xie held an urgent meetings with the city and provincial governments, and submitted all information to Beijing in January. Later that month, Beijing approved the listing plan.

Denway then offered 3.3 billion shares at $1.22 to the public on February 5. Peregrine was the lead underwriter.

After last week's listing, Jinda owns 54.26 per cent of the shares, Yue Xie 17.74 per cent, and Peregrine three per cent. Twenty-five per cent is publicly owned.

Half the funds raised from the listing will be used to buy new equipment for Guangzhou Auto. The other half will be used as working capital.

''Guangzhou Peugeot continues to be our focus operation. We would like to produce Mercedes-standard cars,'' said Mr Xie.

Last year, Guangzhou Auto manufactured 20,000 cars, 95 per cent of which were for the domestic market.

''We would like to expand to overseas markets, such as Africa and the Middle East, but we need foreign currency to do that,'' Mr Xie explained.

Plans call for production to be increased to 30,000 cars this year, 45,000 in 1994, 55,000 in 1995 and 150,000 in 1997.

Guangzhou Auto currently has a 10-per cent share of China's car market. Mr Xie said by 1997, he expected this to have risen to 20 per cent.

However, Baring Securities takes a cautious view of Denway's expansion plans.

Baring's Mr Mansfield Mok said the company's production capacity might not be able to expand as fast as predicted.

In addition, the company's reliance on the domestic market would be affected by the devaluation of the yuan, he said.

He expected turnover to level off this year, and predicted slightly increased profits of $147 million. In 1994, profits are predicted to rise to $162 million on turnover of $2.44 billion.

Mr Xie said Guangzhou Auto only listed parts of its operation through Denway. Others were held by Jinda.

''I plan to merge the unlisted operation from Jinda into Denway. But I understand that under Hongkong stock regulations, I have to maintain the business under the listed company. I still don't know how I will do it, but I am sure I will find a way.'' Facts file Facts file Guangzhou Auto Group Corp Background: Set up in 1984 as a stated-owned enterprise. Last year, the company became a Hongkong-registered company and launched its public offer on February 4, 1993. Profits: $115 million (1989); $55 million (1990); $147 million (1991); $129 million (1992); $147 million (1993, forecast by Baring); $162 million (1994, forecast by Baring). Products: Cars, coaches and car components. Contacts: General manager, Mr Xie Gancheng Head of general office, Mr Gan Jinchi Address:114 Dade Road, Guangzhou. Tel: 8864310 ext 3506, Fax: 8862780