Question: What is the purpose of your trip to Beijing? Gillam: Every year the board makes one overseas visit to somewhere within the bank's operation. I last came here [to Hong Kong] three years ago, and the board has never been to China. When I first became chairman, my responsibility was to look at the global strategy of the bank and what areas we should go further into. The bank's strength is in Asia. It is important to bring the board here and to China because, as strong as we are in Hong Kong, we have to look north. Now, we are maintaining the biggest network of all banks in China. To take the board to Beijing is a statement to our Chinese friends of the importance of the link we attach to China. Q: Who will you meet in Beijing? Gillam: The schedule is to go to Shenzhen first and then fly to Shanghai for two days. The board will stay in Beijing until next Sunday. We'll see officials from the People's Bank of China and the Chinese Government. Q: A few months ago, you said in Hong Kong that the strategy was to enhance trade deals and be cautious about project finance in China. Has this view changed? Gillam: It is still my view. But that does not mean we will not arrange project finance. It is just that we do not see the bank as a very large long-term lender for projects, given the size of the bank and the limited amount of capital we could deploy this way. Q: Do you think the projects are too risky? Gillam: No, we just want to make the maximum use of the limited capital. I don't see a very high profit margin in project financing because of the keen competition. Q: What opportunities do you foresee for foreign banks in China under its newly imposed macro-economic measures? Gillam: The more liberalisation and the greater the economic changes, the better the prospects for our bank. Standard Chartered is a bank with 12 operations in China, but the amount of business is still very limited. Any relaxation which allows us to expand our business is welcome. Q: When do you expect retail banking services to be open to foreigners? Gillam: No idea. But we are ready to enter the market with the backing of the solid retail base in Hong Kong. Q: Does it make sense to list the London-based banking group's Hong Kong operation? Gillam: We have plans to list Standard Chartered Bank Plc in Hong Kong and Singapore, as a commitment to this part of the world, and allow local people to buy shares directly. Q: But why not spin off the Hong Kong operations for a listing, which could be more attractive for the local investors? Gillam: Because we believe we gain from being a group, and will lose by having separate companies with separate minority shareholders in different parts of the world. We think that this type of organisation would be much more difficult to manage than thepresent one. A separate listing would also affect efficiency, given the group's interconnected global network. Also, the bank is primarily British institutional investors-based, but we would expect in due course more investment from Asia. As about 70 to 80 per cent of its earnings are from the Asian-connected network, we are spending more time to be seen in that community and make clear our commitment in the region. If we split the bank into a series of local companies with local shareholdings, the danger is that we go back to a federation of banks with many unnecessary barriers, which only result in inefficiency. Q: How is the secondary listing plan in Hong Kong and Singapore progressing? Gillam: It is only a matter of when we want to do it. A lot of work has been done already. Although it may be a very straightforward arrangement which involves no capital-raising, we still cannot rule out the option of a new issue at this stage. The bank's shares will be listed in Hong Kong and Singapore simultaneously. Q: When do you expect the listings to happen? Gillam: Certainly within the next six months, probably sooner. Q. Tony Nicolle [general manager of Standard Chartered Hong Kong] was quoted a few weeks ago as saying that decisions were made in London in which he had no control. He also warned local investors of large fluctuations in the results of the Hong Kong operations after the London board decided to publish the local operations separately. What does he mean by that? Gillam: I've read the press report. I don't know exactly what the conversation was, but we want the local management to have as much authority as necessary. I don't want to give the impression that the London board manages the bank from 6,000 miles away.The board will form the policy and let the local management run the bank to produce the maximum return for the investors. I figure all he was saying was that if we publish the Hong Kong results, which are very good now, and if the economy went into major recession, that would affect the size of the profit we are making. I think what Mr Nicolle said was nothing more than that. Q: China is expected to regain GATT status. How far would the move benefit Standard Chartered Bank as a trading finance bank? Gillam: I can't be specific on that. It depends entirely on whether that leads to great changes in the amount of the foreign trade. China is already a major exporter, and the export volume is growing substantially every year. The re-entry is important for the country, but I doubt whether it will help increase the volume of foreign trade and bring additional benefits to the bank. Q: You said you were cautious about project financing in China . . . Gillam: We are selective in project finance in all parts of the world, not just China. Our experience is that the returns to other lending banks in project finance are very small. We are a large bank but not a giant bank. I can put my shareholders' moneyin other areas which provide a better return. Q. Are there some projects, for example infrastructure projects, on the mainland which you think will provide a better return. Gillam: If you think of the size of China, its capital requirement is going to be enormous. The demand on the world's financial system is also enormous and is dependent on how fast the Chinese Government decides to develop its infrastructure. But from our point of view, we have to be very selective.