CHINA might become one of the region's leading eel producers if Yaohan International Holdings (YIH) is able to follow through on its plans to open 500 fast-food restaurants in Japan specialising in the delicacy by 1999. After the company's annual meeting yesterday, chairman Kazuo Wada said the initial three Una-Sen outlets opened last month in Tokyo were being supplied by a company in Guangdong province. Mr Wada said China had the potential to supplant Taiwan as the leading eel exporter because of its low wages - a factor that would allow Yaohan to sell its eel dishes at prices nearly 50 per cent below its Japanese competitors. The eel venture is part of an ambitious commitment made by Yaohan in China, which will see it invest US$300 million over the next three years if all of its projects materialise. Mr Wada said Yaohan was concentrating much of its efforts on Shanghai, Nanjing and four other big cities located between them. The company opened its first joint venture supermarket in Shanghai on May 28 and plans to open another four this year and an additional 10 by the end of next year. A department store in the Pudong development zone is now under construction and is expected to be completed by the end of next year. Mr Wada said many Hong Kong and Japanese retailers had already signed leases. ''We believe that the retail industry in China has enormous potential,'' he said, adding the increasing wealth of middle-class consumers was playing a leading role in this scenario. Last month, Yaohan announced a share-swap proposal with 42 shareholders of Yaohan International Co (YIC), which would see its shareholding in YIH fall to 35.36 per cent from 75 per cent. The proposal would see the sale of the 42 shareholders' 51.25 per cent interest in YIC to Mr Wada and his brothers and the purchase by the shareholders of a 38.44 per cent interest in YIH. Yaohan went public last October after raising $662 million at $2.68 a share. The stock has been a disappointment, however, tumbling to a low of $1.92 in March before rebounding. It closed yesterday at $2.25.