FOREIGN banks have seen increased demand for loans to fund projects in China since the Chinese Government introduced its credit-tightening policy. Maurice Lee, project finance manager of Hongkong Bank China Services, said yesterday that investors unable to get funds from state-owned mainland banks were turning to foreign banks. Hongkong Bank, one of the foreign banks allowed to offer non-yuan business in China, has five branches and four offices in the country. Speaking at a conference on business co-operation between Hong Kong, Taiwan and the mainland, Mr Lee said the macro-economic control measures would not be suspended this year. There have been suggestions that the austerity programme introduced by Beijing in the middle of this year would shortly be terminated, but Premier Li Peng reaffirmed yesterday that the macro-control measures were a long-term task. Mr Lee said: ''It is difficult to predict how long the measures would persist. But if we look at the development this year, the objectives of the macro-control measures have yet to be achieved. So it is likely the measures will be carried over into next year. ''Because of the shortage of funds in China, foreign banks suddenly find themselves facing more demand for loans from many investors who have been turned away by state-owned banks.'' Mr Lee said the credit-control policy affected only state-owned banks' yuan business, and foreign banks' foreign currency lending was not directly affected. Foreign banks could issue letters of credit or foreign exchange collateral to enable their clients to obtain yuan loans from mainland banks. As the supply of yuan loans would remain tight in the foreseeable future, investors should pay attention to foreign exchange risks when financing their mainland projects, said Mr Lee. They should take a long-term view and use yuan profits to expand further their market share and remit the money out of China when the yuan became freely convertible. ''When planning their new projects under the current conditions, the only thing foreign investors can do is to seek assurance from local authorities that the Chinese side will help to secure yuan loans,'' he said. When foreign investors committed themselves to a project, whether injecting cash, equipment or knowhow, they were putting foreign exchange into a country with foreign exchange controls and exposing themselves to the risk of yuan depreciation. Investors should try to export their products or increase the proportion of local raw materials to balance their foreign exchange demand. In theory foreign investors could change their yuan profits into foreign currencies at swap centres, but they would find it increasingly difficult to do that as the yuan would be under depreciation pressure.