TOY-MAKER Hongkong Toy Centre International (HKTCI) will sell seven per cent of its enlarged share capital to China Resources in a bid to boost its performance in the China retail market. HKTCI has entered into a conditional subscription agreement to sell 33.3 million new shares at $1.04, a move that will raise approximately $34 million. China Resources will take 23 million shares through subsidiary CRE while the Bank of East Asia, the group's principal banker, and Onwel Strategic Holdings will each subscribe for five million new shares. The deal brings new investors into the company at a 20 per cent discount to HKTCI's Friday share price close of $1.31. HKTCI said it would use the cash as additional working capital, specifically the overall expansion of HKTCI's sales and distribution activities outside Hongkong. Upon completion of the subscription agreement, a joint-venture company will be formed to establish distribution networks in China to sell exclusively the entire range of products manufactured or traded by HKTCI. The new joint venture will have an authorised share capital of $15 million. HKTCI and CRE will each hold 40 per cent in the joint venture, with the Bank of East Asia and Onwel each taking 10 per cent. The company has recently set up some sales counters and wholesale-distribution business in China. They have provided greater sales than expected, spurring the company's decision to upgrade its attack on the potentially massive market. ''Demand for toy products has been growing hand in hand with rapid economic growth in China,'' said Mr Victor Lo Hung, chairman and managing director of HKTCI. He added: ''More importantly, today's parents care about the lifestyle and the development of their children, which is stimulating the toy market. ''We believe that a partnership with strong PRC-based companies will allow the group to expand in the China market rapidly.'' HKTCI expects the new joint venture to be able to open up to eight shops in China this year and is looking to its new partners to assist it in planning further expansion. Mr Frank Ning Gao-ning, CRE's managing director, said: ''China has 360 million children, which in itself is a huge market. Combining our knowledge and connections in China and HKTCI's experience in manufacturing and distributing toys will make this jointventure a very promising investment.'' HKTCI currently makes about 600 kinds of toys, including plastic and electronic toys and dolls, all of which are made at the group's Dongguan factory, which it opened in 1986. The group stands out from many other Hongkong toy sector companies in that it has developed its own brand, Playwell. This enables it to earn higher margins on much of its production than those companies working on an OEM (original equipment manufacturer) basis. In the six months ending in June 1992, HKTCI reported a $10 million profit attributable to shareholders, compared with a $5.2 million loss in its interim results the year before. The majority shareholder of HKTCI, the Lo family, will remain the largest shareholder, with about 46.1 per cent of the enlarged share capital. Prudential Asset Management Asia will remain the company's second largest shareholder, with 20.25 per cent of the enlarged share capital.