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SCMP Reporter

THE International Finance Corp (IFC) plans to set up a joint-venture commercial bank in China with a mainland partner.

   The bank will have a registered capital of US$60 million.

  According to officials from the private sector finance arm of the Washington-based World Bank who recently returned from China, negotiations are at an ''advanced stage'' and the bank is expected to open for business by mid-year.

   The new bank, whose exact location has yet to be decided, would be the fourth Sino-foreign joint-venture bank to be approved by the Chinese Government and the second with the participation of a multilateral entity.

  To date, just two Sino-foreign joint-venture banks - Xiamen International Bank and International Bank of Paris and Shanghai - have actually begun operations.

    Mr Jemal-ud-din Kassum, vice-president for operations at the multilateral organisation whose mandate is to promote private enterprise in developing countries, declined to reveal the partner but suggested it was a major state-owned bank.

   ''Our partner has long experience in commercial banking in the domestic market and can offer services of a wide variety,'' he said yesterday.

   The IFC would contribute $8 million for a 12.5 per cent equity stake, accompanied by a seat on the board of the bank, in northern China, and the mainland partner is to contribute the remaining $52 million for an 87.5 per cent holding.

  The establishment of the new entity has received formal approval from the IFC's board of directors, who are the appointed representatives of the corporation's 150-plus member countries.

  The launching of the joint-venture bank is part of the corporation's comprehensive strategy, inaugurated in October last year with the establishment of a representative office in Beijing, to substantially beef up its activities in China.

  Since China became a member in 1980, the IFC has invested $65 million on its own account, and through its involvement mobilised several times that amount in investment.

  Now management plans to invest as much as $600 million over the next three years, with up to $200 million of that to be spent this year on more than 10 projects.

  According to Mr Kassum, the IFC plans to complete within the next six months its first direct mobilisation of capital to be invested in China through a syndicated commercial bank loan of $150 million.

  As the IFC's mandate prohibits sovereign backing of projects, the loan, to a Chinese company, will not be guaranteed by the government.

  The IFC will contribute $50 million to the project, a joint-venture company in Ningbo, Zhejiang.

  ''We expect a strong mobilisation factor to be present in most of our transactions,'' Mr Kassum said.

  ''We play a catalytic role by mobilising capital markets funding for projects.''   Projects under consideration include a joint-venture securities company, a venture capital fund, participation in power generation, and transportation and manufacturing projects.

  The IFC also aims to provide advisory services to the Chinese Government in capital markets development, and would like to help Chinese entities list on foreign markets initially and eventually assist them to go public on China's domestic stock exchanges.

  IFC officials, who recently returned from a roadshow in five Chinese cities, will meet Hongkong industrialists and make presentations to the American Chamber of Commerce and other such groups this week in a bid to drum up new projects.

  Worldwide, the IFC's equity portfolio represents $1 billion invested in more than 350 companies.

  The IFC does not invest as a major shareholder and does not take an active role in company management.

        As a rule, the IFC does not consider projects with a total cost of less than $10 million.



IFC in US$60m China venture