China needs US$233b for key sectors, says survey

AS Southeast Asian countries show concern about China's mind-boggling appetite for funds, a survey says the country will need up to US$233 billion by the year 2000 to develop just three key infrastructure sectors.

The Peregrine Investments Holdings survey, which will be released next week, estimates that as much as 80 to 90 per cent of the funds needed by China's transport, power generation and telecommunications sectors in the next six years may be raised from the massive pool of domestic savings, a move which will boost its securities market.

The balance of 20 per cent or $47 billion can be raised through international bond and equity placements.

''We anticipate that these financing arrangements will have a big impact on international businesses,'' said Peregrine managing director Francis Leung Pak-to.

The financial services group forecasts that portfolio investments, including bonds and equities, into China will increase to $8 billion this year, $3 billion more than last year.

This is partly because of a substantial increase in B shares and H shares issued abroad by mainland companies.

Mr Leung, giving a preview of the survey at a seminar in Beijing yesterday, said China's huge appetite for funds presented a variety of business opportunities to companies providing infrastructure support.

But he warned that the practice of limiting the rates of return on power projects and barring foreign companies from operating telecommunications systems would push investors away.

''Other [Asian] countries are competing for the same pool of investment.'' Mr Leung's warning comes at a time when South-east Asian countries are extremely concerned that China is siphoning off funds, expertise and manpower from other Asian countries.

On Monday, at a seminar ahead of the Asian Development Bank's annual general meeting in Nice, France, Ashwin Kongsiri, president of Thailand's Industrial Finance Corp, described China's appetite for funds as ''mind-boggling''.

At the same seminar, Singapore's Senior Minister Lee Kuan Yew warned that China was introducing a powerful suction effect on funds, which partly accounted for a slowdown in foreign investment in the newly industrialising nations of Southeast Asia.

He said while China's growth would add up to one per cent to Asia's gross domestic product growth, it was also absorbing a lot of foreign funds.

Figures released by China showed that last year alone, it attracted $100 billion in contractual investments, equivalent to the total of the last 10 years.

Lured by a market with the potential of 1.2 billion consumers, chief executives of multi-national companies have been jumping on the bandwagon to seal gargantuan deals with Chinese parties.

In the telecommunications industry, New York-based AT&T said last week it would invest more than $150 million in China, including the setting up of an arm of the Bell Laboratories research centre.

Other telecommunications companies expecting to be allowed to set up ventures in China include French group Alcatel Alsthom, German conglomerate Siemens, Japanese electronics giant NEC and Canada's Northern Telecom.

Recently, US giant IBM sealed a deal with the Chinese Government to develop information technology network systems under a $100 million two-year investment programme.

In the transport sector, car manufacturers are fighting to set up production centres on the mainland.

German luxury car manufacturer Porsche last month said it would like to build the first family car suited to the China market, while rival Daimler-Benz was in a tussle with Chrysler over a $1 billion mini-vehicle joint venture in southern China.

In the power sector, several Hong Kong-based companies, led by Gordon Wu Ying-sheung's Consolidated Electric Power Asia, have gone into power station construction in a big way.

Even state-owned French group Electricite de France is considering a $100 million investment in three coal-fired power stations - one of which could be in partnership with China Light & Power Co and a mainland party.