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SCMP Reporter

China International Trust and Investment Corp (Citic) - the mainland's flagship overseas fund-raising vehicle - is planning to overhaul its operations in a bid to become a diversified United States-style financial services giant.

 Speaking to Business Post, president Qin Xiao said: 'We want to establish a brand providing the full scope of financial services, like Travelers and Citicorp of the US.'  Mr Qin said a central part of the plan will be the merger of Citic Industrial Bank and Citic Ka Wah Bank to create a mainland financial force.

 The restructuring comes as the government tries to shore up financial institutions in the wake of the trouble plaguing the country's international trust and investment corporations (Itics).

 The plan will also encompass a review of Citic's other operations - industrial investment and tertiary services.

 Mr Qin said the planned changes were taking place against a backdrop of corporate globalisation, the Asian crisis, the mainland's economic slowdown and the proliferation of financial irregularities.

 He said given this environment, Citic wanted to integrate its financial operations, ranging from commercial banking, securities, fund management, trust and leasing.

 Mergers and acquisitions would be used to expand the operation, Mr Qin said.

 'It is logical for Citic Industrial Bank to merge with Citic Ka Wah Bank,' he said.

 Mr Qin dismissed speculation Ka Wah's $645 million share placement this month would be used to buy Citic Industrial.

 He said conditions were not ripe for buying, citing Beijing's policy banning foreign participation in mainland banks and the market's conservative view of the financial industry.

 Financial assets account for about 80 per cent of Citic's assets or 60 to 70 per cent of the net value. They also contribute 70 per cent of profit.

 Mr Qin said telecommunications would be the key focus of its industrial investment operations as other sectors such as power was operating in a saturated market.

 The company is expanding into cable television, and is in joint venture with China Unicom to operate GSM mobile phone networks in four cities.

 Mr Qin said Citic would retain majority control in Asia Satellite which is undergoing an ownership reshuffle.

 He said Citic had sold about half its 1 per cent stake in China Telecom (Hong Kong) and planned to dispose of the rest when permitted.

 Citic's tertiary service operations cover travel, hotels, foreign trade, consultancy and properties. It also has interests in Cathay Pacific and DragonAir through Citic Pacific.

 It remains unclear how the forthcoming Trust Law - which aims to regulate the Itic sector - will affect Citic, a conglomerate with a focus on financial assets.

 Mr Qin said Citic had separated its securities business from the trust operation which made up 3 per cent of assets.

 'In future, industrial funds will be put into the trust business, while the planned securities funds will be included in the securities firms,' he said.

 Citic, the largest company of its kind in the mainland, has been affected by the fallout of Guangdong International Trust and Investment Corp's (Gitic) demise, with Moody's Investors Service placing it on review for a possible downgrade.

 'Sophisticated investors and institutions know that Citic is not an Itic,' Mr Qin said.

 He reaffirmed Citic's debt-servicing ability, backed by net assets of 32 billion yuan (about HK$29.76 billion) as at December last year.

 Citic has foreign debts of US$2 billion, most of which is medium to long term, well within the state approved quota of $2.5 billion. Its annual debt repayments are about $200 million to $300 million.

 Beijing has said most Itics would be merged, but Mr Qin said Citic had no plans to become part of the merger drive.

 'It is not our preference to merge with other Itics because their assets and staff do not match our standards.' Failure 'lesson in using rules', Page 3 



Restructuring comes as state investment bodies face rough ride