International Finance Corp to invest in offshore venture-capital fund

THE International Finance Corp (IFC) has shown its faith in China's continuing economic boom by announcing two new projects.

The World Bank offshoot, which provides backing for private sector projects in developing countries, this week said it would invest US$7.5 million in an offshore venture-capital fund for the mainland.

In another development, the IFC announced plans to set up China market indices that would for the first time provide information on both A and B shares in the Hong Kong, Shanghai and Shenzhen markets.

The venture-capital fund, to be located in the Cayman Islands, is the first of its kind in China to be set up with IFC backing.

Called China Walden Investments, the fund will be managed by the Walden Group, a US venture-capital company with strong Asian links.

The fund, worth at least $25 million, but with a target size of $50 million, will invest in unlisted China securities. It will have a 10-year life and is expected to attract institutional investors from the US, Europe and Asia.

Its target investments will be in joint-venture projects in fields such as telecommunications, building materials, health care and bio-technology, software and infrastructure.

Varel Freeman, director of the IFC's Asia section, said: ''Through this project, the IFC hopes to introduce much-needed venture-capital management expertise to China.

''In addition, venture-capital funds provide an effective means for the IFC to support small and medium-sized enterprises.'' The IFC's Deborah Farrell said the offshore location would help to attract investors who might otherwise be concerned about the unpredictability of dealing with China's legal system.

She said the IFC would be looking at investing in other similar funds for the Chinese market.

Meanwhile, the IFC's new Global China Index will provide data on 81 stocks capitalised at about $17 billion.

Also being launched is the Investible China Index, which includes 16 B and H shares valued at about $1.7 billion.

The IFC is hoping its new indices will offer subscribers the first comprehensive source of information on the movements of all categories of mainland stocks.

China's stock exchanges expanded from 54 listed companies at the end of 1992 to 129 by September this year. More listings will be added next year.

''This increased volume of listings poses difficulties in maintaining a representative stock index,'' said Iyad Malas, manager of the IFC's Emerging Markets Database, explaining that it would need frequent updates to the index to maintain the level of capitalisation required.

The new indexes are being developed with the help of the Stock Exchange Executive Council, a securities policy institute based in Beijing.