ONE day commercial banks will be able to plunge into the mainland yuan market. But, while bankers dream, cobwebs grow in the offices of departments waiting for China to open this market a crack further. Until it does, the world's investment bankers are finding China's corporate business a far richer field to till. After a few years of austerity, scores of companies have come to market with public floats in the past year, and many more are in the pipeline. Banks are expanding their Chinese corporate finance teams, after some rather bloody downsizing in the mid-1990s. Goldman Sachs is aggressively rebuilding its China expertise, while earlier this year Banque Indosuez created an Asian investment banking arm for the first time, hiring an experienced banker from the mainland. Morgan Stanley set up a joint-venture investment bank in Beijing two years ago, when most other houses were cutting back their China staff. Others, such as BZW Asia, are building on their regional broking presence by ploughing the more lucrative field of investment banking. The latest round of China listings has added many names to underwriters' lists, including Credit Suisse First Boston and NatWest. Peregrine caught some by surprise in the past year after winning mandates on a number of deals. Nearly all these bankers are based in Hong Kong, with travel schedules that include frequent and extended mainland trips. Bankers are still falling over themselves for every new corporate mandate, but with so much more business around, bankers, like investors, are starting to become more selective. 'Chinese companies listing now are learning that they aren't the only ones looking for money. They have to be prepared to offer terms that the market will buy,' said one head of corporate finance at a French bank. Some banks have turned down business from red-chip issuers that seemed a touch too speculative. One underwriter, ABN-Amro, walked away from Jiangxi Copper's public float just before the company came to market. The bank had a much lower forecast for copper prices than the company, and apparently the market did too. The shares sank 7.8 per cent below their issue price when they listed on June 12. Companies in provinces that no one outside China appears to have heard of are particularly difficult to sell to an international client base, bankers say. BZW's managing director of corporate finance, Huan Guocang, said Chinese banks were trying to build up their own investment banking operations. Mr Huan cited the Bank of China, the country's foreign exchange bank and one of the largest retail banks in Hong Kong, and China Everbright Bank. They are now discovering the business is risky, expensive and requires experience. China Development Finance Corporation, the investment banking arm of the Bank of China, has been invited to join in nearly every overseas offering in the past year - and there have been many. Investment bankers in Hong Kong say having the mainland bank on any deal is a good political move. Chinese companies still find the services of foreign investment banks expensive. Ancillary legal, accountancy, public relations and other fees also seem to leave many companies wishing there were a cheaper alternative, market sources say. 'Yes, they do pay a price, but it's the market price,' said Mr Huan. 'It takes seven or eight months to structure an equity deal, to create a company that didn't exist before and negotiate every detail with the Government.' BZW has been involved in several of China's recent listings, including Zhejiang Expressway and a power producer from the same province, Zhejiang Power, expected to come to market this summer. Bankers with a few deals under their belts say negotiations seem to go much faster than they did in the bad old days, when Chinese authorities were looking under every rock for the foreigner trying to take advantage of them. Many report a change of attitude among their Chinese clients, a greater will to do what needs to be done to get a new issue off the ground. Liu Ehr-fei, head of investment banking at Indosuez W. I. Carr, said: 'The China Securities Regulatory Commission has become much more sophisticated towards overseas issues. They understand you can't force a market, that you have to give investors what they want.' Before, a company might tell its banker to price shares at 20 times next year's earnings when the market dictated a multiple of 12, he said. Some companies would then try to bargain as though they were in a street market, asking to split the difference between the price they sought and the price their bankers told them they could get. 'Underwriters can't bargain with the market. They are not buying the shares,' said Mr Liu. Mr Huan said: 'Officials now realise there are huge costs in opportunity in long protracted negotiations. You could spend three or four years working on a deal with nothing signed at the end of that time. In the meantime, local economies are still waiting for funds to keep growing. 'Five or six years ago, Chinese companies had no access to international capital markets. Either they attracted direct investment or they borrowed from government banks.' Direct access to global markets enabled many companies' assets to fetch a higher price. Mr Huan recounted one tale of a provincial toll-road operator on the verge of signing a 20-year contract with a Hong Kong company for a concession on the road. The provincial authorities considered the Hong Kong's company valuation too low. No contract was signed. Eventually, the province floated 35 per cent of the equity in its roads for nearly 10 times the valuation. Someday, most bankers hope, China will open the local currency business to foreign banks, making it more profitable to keep a commercial banking branch in China. Until then, corporate finance could very well continue to be the strongest banking link between Hong Kong and the mainland.