First Tractor is seeking links with foreign companies to upgrade production, services and markets in the wake of a 97.1 million yuan (about HK$90.92 million) first-half loss. State policies to protect the environment and the loss of price protection for some crops combined with increased raw-material costs to leave the H share bleeding. Chairman Fang Gang said the unfavourable business environment would remain for 'quite a long while' and the company was seeking co-operation with foreign industry players to upgrade its product and services as well as to expand both domestic and overseas markets. Prospective foreign partners for the sole locally listed tractor manufacturer include Fiat from Italy and New Holland from Britain. They began contacting First Tractor in 1997. Some suitors had proposed buying a controlling stake in First Tractor when it was arranging its flotation in Hong Kong - but Beijing rejected the proposal. There are still restrictions on foreign companies taking over such large state-owned enterprises. 'The government might change its mind in future . . . but its attitude and the law remain unchanged for the present,' Mr Fang said. Another state-owned tractor maker in Jiamusi, Heilongjiang province, had sold more than 60 per cent to United States tractor manufacturer John Deere to stave off bankruptcy, Mr Fang said. Mr Fang indicated co-operation could benefit both parties as his company could get the technology to upgrade its products and services, while the foreign partners could gain easier access to the mainland market. In the first half, the mainland imported about 500 large tractors - selling at 30 per cent to 40 per cent below the international price - to take part of the domestic market. First Tractors was trying to speed up diversification into construction machinery, he said. Also, despite government funds to partly cover replacement costs for old farming machinery, the scheme could not go ahead as neither farmers nor regional governments had the matching resources.