YIZHENG Joint Corp of Chemical Fibre plans to use most of the proceeds from its H-share issue to fund the third phase of its expansion plan, which will require an investment of 3.26 billion yuan (about HK$4.4 billion at the official rate). Company president Ren Chuanjun said yesterday in Beijing that the plan, to be completed in 1995, would allow Yizheng to supply its own raw materials, to diversify its product range, and to boost production to 950,000 tonnes of polyester per year. Mr Ren said the firm's financial statement was being prepared and the asset valuation process was near completion. A listing in Hong Kong will follow soon after the paperwork is completed. ''Our industry links up with the very basic need of everybody, that is, cloth,'' said Mr Ren. Yizheng is now owned 30 per cent by China International Trust and Investment Corp (CITIC) and 70 per cent by China National Textile Council. Mr Ren said the firm would balance its foreign-exchange income and spending to leave enough foreign currency to pay dividends to H shareholders. Yizheng has made a big impression with one senior US analyst. Anantha Raman of SGWarburg's New York office, who visited the company's plant this month, described Yizheng as a ''pure play'' on the chemicals industry. Warburg is underwriting Yizheng's H-share issue. ''It solely manufactures polyester, and that's it. It's a simple business,'' said Mr Raman. He said Yizheng, whose annual output of 500,000 tonnes makes it the world's fourth-biggest polyester maker, was based in the world's most rapidly-growing region. Hoechst of Germany is the world's biggest polyester maker, followed by Dupont and Eastman Kodak of the United States. Last year, world polyester production totalled 9.8 million tonnes, according to Mr Raman. ''Yizheng is also the largest manufacturer of polyester within China, accounting for half the mainland market, and demand is growing nicely in China,'' he said. Mr Raman said China's huge population and rapid economic growth created a vast market for polyester fabrics. Mr Raman said Shanghai Petrochemical China's second-largest polyester producer, made more than 400 products. The China-incorporated enterprises to be listed in Hong Kong so far are Tsingtao Brewery, Shanghai Petrochemical, Guangzhou Shipyard International and Beiren Holding. Questions are increasingly being asked about risks relating to such firms' sensitivity to China's overall economy and their ability to pay dividends to overseas H-shareholders in foreign currency. Mr Raman said potential investors in Yizheng had to consider factors affecting its production costs, its vulnerability to foreign-exchange fluctuations and the impact of China's possible re-entry to the General Agreement on Tariffs and Trade (GATT). Raw materials - purified terepthalic acid (PTA) and ethyelene glycol - account for 80 per cent of Yizheng's production costs. Two-thirds of its raw materials come from within China and one-third is imported. Mr Raman said production costs in China were lower than in regional competitors such as Taiwan and South Korea. ''Yizheng's plants are modern, imported in the 1980s from Japan and Germany,'' he said. Mr Raman said the company's exposure to foreign exchange fluctuations was limited to 20 per cent of its sales, assuming that production costs were about 75 per cent of sales. Yizheng is building a plant that, from 1995, will enable it to make its own PTA. The company's ability to pay dividends in foreign currency is being questioned as only about five per cent of its products are exported. Mr Raman said the company was beginning to quote some products in US dollars to help increase foreign exchange earnings. He said that if China re-entered GATT, polyester import prices would be cut, but so would raw materials prices.