CHASE Manhattan is changing its tactics on China, with the opening of its second representative office in Shanghai next month. Unlike many foreign financial institutions, which have been aggressive in their dealings with mainland business, Chase has adopted a pragmatic approach after becoming the first US-based bank to re-enter the country, opening a representative office in Beijing in 1981. The bank also applied this week to open its first branch office in Tianjin, which it hopes will be operative before the end of this year. Chase Manhattan Hongkong's senior vice-president and general manager, Mr Richard Mounce, said that in the past there had been no need for more offices because most mainland business could be handled from Beijing or Hongkong. However, the tremendous acceleration of economic growth in recent years and a decentralisation of economic planning has forced the bank to expand its network. Mr Mounce said Tianjin was selected after a nine-month study because it allowed Chase access to clients based in Beijing and the northeastern provinces. ''Tianjin started its growth cycle later than certainly the southern regions, or Shanghai for that matter, but is reaching the same kind of growth curve,'' he said. Chase's decision was also prompted by the offer by the Tianjin Economic Development Area of a variety of tax incentives, and the fact that it has attracted major foreign investors such as Motorola and SmithKline Beecham. The opening of a branch office could allow Chase to offer a full range of banking services from loans and deposits to foreign exchange and letters of credit. At present, foreign branch offices are not allowed to engage in renminbi transactions, but China has indicated it plans to change this policy. Mr Mounce said the bank did not think anything would happen this year, but he is hopeful progress will be made next year. ''I think it's pretty clear when they do that, they will do it regionally, gradually, and in a controlled fashion - but I think they are moving in that direction,'' he said. A large part of Chase's business in China is the financing of medium and large industrial projects to Chinese entities or joint ventures, alone or through syndicates. With China now poised to spend billions of dollars on telecommunications, power and petrochemical facilities, Mr Mounce said there would be significant opportunities to provide much-needed financing. For example, he said, China's plan to expand power-generating capacity by 13,000 megawatts in each of the next five years would require annual investment of about US$10 billion, with much of that from foreign investors. ''There is an enormous need for power . . . so it's a major area of focus for us, '' he said. ''We are discussing a number of situations right now with foreign investors and Chinese entities.'' Another growing business area for Chase is its interest rate, currency and option-swap services for Chinese clients. Mr Mounce said that for years the Chinese borrowed internationally on terms they believed to be attractive but saw debt and interest rates increase because they used floating rates, failed to hedge their exposure and used currencies that fluctuated in value. As a result, he said, many projects ran into trouble. Over the past five years, Chase has worked with its Chinese clients to either reduce or eliminate risks or switch from one risk to another where they were more comfortable. ''It is a long-term business because it requires a great deal of education and working with people to make them understand the tools, and how they can work to their benefit,'' Mr Mounce said. ''That will continue to be a major part of what we do.''