Shenzhen International Trust & Investment Corp (Szitic) has said new foreign credit lines to the company have dried up since the bankruptcy of Guangdong International Trust & Investment Corp (Gitic) and the successive revelations of debt repayment troubles at other mainland window companies. Director Edward Luo said new overseas lending had stopped since the end of last year and it was scrambling to make provisions to repay its dollar-denominated debt due this year. That includes a US$150 million floating rate bond issued in 1994 to help build a 300 megawatt power plant for which investors may demand repayment by September 30. Szitic is arguably one of the most profitable companies in the mainland's beleaguered investment trust sector. From a wide-ranging portfolio that includes interests in Guoxin Securities, Shenzhen's Wal-mart and a host of small manufacturing enterprises, Szitic last year claimed unaudited profits of 244.52 million yuan (about HK$227.64 million). Mr Luo describes the funds freeze as a galling state of affairs, especially since Szitic last year repaid without delay foreign borrowings totalling $132.46 million and domestic borrowings of $10.78 million and 250 million yuan. A defiant Mr Luo said he told foreign bankers: 'Do you want to give up on the China market? If you are brave enough you can seize this opportunity to enter.' The credit crunch has affected Szitic's operations, finance department manager Chen Wei said. Besides the $150 million note, the company claims medium and long-term foreign borrowing of $91.447 million and short-term debt of $13.4 million. In response, Szitic has been shrinking expansion plans while accelerating debt collections, primarily for its finance leasing business. It is also strengthening relations with domestic financial institutions in a bid to increase the proportion of domestic loans against the impact of the withdrawl of foreign lending. To meet immediate capital shortfalls, the company has been relying on internal resources. Ms Chen said such fund raising accounted for the firm's reported assets, falling from 5.6 billion yuan in 1997 to 5.1 billion yuan last year. Despite the fund-raising problems Gitic's bankruptcy has generated for his company, Mr Luo shied away from criticising the central bank's decision to close the firm. 'As an economist I should say if the debts repay assets and debts cannot be repaid on time the company should be closed down or bankrupt. It is a painful process but a market principle, especially for enterprises themselves,' he said. 'Foreign banks should learn from this. Do not just make close connections with government and companies.' He also welcomed the anticipated cleanup of the trust and investment sector, which is likely to see many non-banking financial institutions closed or merged. Szitic, he said, had moved in recent years to diminish its financing business, while entirely separating its securities and leasing operations. 'Credit business should belong to the banks,' he said. He also said that should the central bank order investment trust companies to hive-off operations - into separate real estate, industrial and leasing businesses, as many analysts have suggested - Szitic was well positioned. Ms Chen added an industry-wide consolidation should help risk-averse foreign bankers differentiate between good and bad mainland companies. 'Right now they see China's financial sector equally, and many have stopped all lending to China altogether,' he said. Despite the liquidity crunch, Szitic officials said it expected to achieve its 180 million yuan profit target this year.