THE Bank of China group in Hong Kong is diversifying from its traditional role as a retail lender into merchant banking. It is increasingly becoming involved in syndicated loans for mainland projects and underwriting new issues. ''Since China began to implement economic reforms and start opening up, the group has directly participated in more than 2,500 projects on the mainland, involving a total of more than US$7 billion,'' said Zhou Zhenxing, general manager of the Bank of China's Hong Kong branch. He said syndicated loans involving international cash held the key to China's hugely expensive economic reconstruction. About 39 per cent of the projects financed have been in the energy sector. The group has arranged finance for seven power-plant projects, including the $750 million Shajiao C power station, which was syndicated last year. Transport projects have accounted for the second-biggest slice of syndicated loan cash, 12.6 per cent. The most notable syndicated loan, $97 million, was for the Guangzhou northern ring road last year. There have also been syndicated loans for projects in the petrochemical, iron and steel, and car industries. The group, through subsidiary China Development Finance, has sponsored eight initial public offers and underwritten 15 new issues. However, Mr Zhou acknowledged that the group was still a relative newcomer to merchant banking. ''Compared with its traditional retail banking business, the group has relatively limited experience in merchant banking,'' he said. The group has also expanded into other areas of corporate finance, such as advising on corporate restructurings, mergers and acquisitions.