CHINA is likely to raise up to US$1.2 billion in the US capital markets over the next 18 months - three times the figure to date, but only a small part of its potential, according to investment bank J.P. Morgan. Shan Weijian, J.P. Morgan's vice-president of corporate finance and Chinese business representative, said about half of the new US issues were likely to be Yankee bonds. ''All the Chinese institutions would like to go to the Yankee market as the first preference. The reason for that is very simple: broader market, more liquidity and lower cost,'' said Mr Shan. He was speaking in Beijing following a two-day seminar organised by the bank in Nanjing for about 60 officials from China's state-owned banks and corporations, and provincial government investment arms. After a decades-long absence, China returned to the US capital markets this year, raising $400 million. Of this, $250 million was a Yankee bond issue for the China International Trust and Investment Corporation (CITIC). Mr Shan said that while the Chinese involvement in US capital markets could triple to $1.2 billion, that figure ''is small for a large country like China''. He noted that J.P. Morgan had helped Kuwait raise $5 billion in one issue just after the Gulf War. Most of the new issues in the US capital markets are likely to be used for infrastructure projects. ''If you look around China you'll find that a large number of infrastructure projects are underway or are being negotiated or are on the drawing boards, and there's huge demand and need for foreign capital,'' Mr Shan said. ''You cannot afford not to look at that [US] market. In the US capital market it's possible to structure the issue with very long maturity, and that's something very desirable for Chinese issuers. ''I'm not saying that's available for all Chinese issuers but over time as they become more familiar with that market, as US investors become more familiar with Chinese issuers, then it is possible to prolong the maturity.'' Mr Shan said that the current credit squeeze, part of the Chinese Government's anti-inflation drive, was good for foreign institutions because it encouraged Chinese entities to seek finance overseas. Meanwhile, the bank plans to heighten its presence in China by setting up two representative offices, one in Beijing and one in Shanghai, this year. It also plans to set up a fund to invest directly in Chinese businesses. ''We have held consultations on the matter with the Chinese departments concerned,'' said Mr Shan. He said the fund would target enterprises working in sectors on the Government's priority list, such as energy, telecommunications and food. The fund would seek well-managed enterprises with high turnover. They should be able to earn enough foreign exchange to meet hard currency needs.