CHINA has allowed its largest car-maker to seek an overseas listing, because the Ministry of Machinery Industry wants to float more cash-strapped state-owned enterprises to raise funds. However, the ministry will also make use of joint ventures and investment funds to satisfy the funding needs of enterprises under its control. Xing Yujiu, director of the ministry's policy regulation and structure reform bureau, said Changchun's First Automobile Group Corp had secured an approval for issuing shares abroad, hoping to raise about US$500 million. The company has yet to decide where it will be listed, but Mr Xing ruled out Singapore, which was more appropriate for light industry companies, saying that the company would opt for an international capital market with wider participation of institutional investors. It is expected that First Automobile, known for its Liberation trucks, will raise money to fund expansion of its production capacity for passenger cars in a bid to meet China's expected boomimg demand as living standards improve. The company is making Audi sedans and will also produce Jieda and Golf sedans through a joint venture with Germany's Volkswagen which will be completed in 1996. 'First Automobile will become a car-maker with production capacity of more than one million vehicles,' which would enable it to compete with foreign factories, said Mr Xing. The ministry already has three candidates among the second batch of 22 state-owned enterprises slated for overseas listing: Harbin Power Equipment, Dongfeng Motor Corp (formerly No 2 Automotive Corp) and Northeast Electric Transmission and Transformation Equipment. Meanwhile, Mr Xing said Beida Fangzheng, a computer software firm under the control of Beijing University, would also be floated overseas. Mr Xing said First Automobile would go public after Dongfeng and Northeast Electric, which both planned H-share issues in Hong Kong in the middle of next year. Dongfeng would raise US$400 million to US$500 million. He said the ministry would not allow more H-share issues before the four candidates, even though many enterprises had requested a listing, but 'only four are not enough, so we will discuss the issue with the government'. He said the ministry was considering floating the enterprises on the B-share markets in Shenzhen and Shanghai. The choice of listing candidates underscores the ministry's emphasis on four industries: vehicles, power equipment, basic machineries and basic components. Although the machinery manufacturing industry appears to be hard-hit by China's austerity programme which has curbed fixed investment, Mr Xing said the policy would not delay listing plans. He said the nagging problem of triangular debts would be resolved by accounting arrangements, which meant enterprises would write off certain assets and the government would not inject any money into them. 'We cannot guarantee that every enterprise is good,' said Mr Xing, because the machinery industry was very competitive now that it was operating in accordance with principles of a market economy. He said the ministry was discussing the formation of investment funds with foreign investors, but it was difficult because the investors were asking for a return of 25 to 30 per cent. 'The average return of our machinery factories is five per cent. The better ones may only have 10 per cent.'