JUN. 11 '87 10:52 IMF WASH DC RAPICOM6300 477-7491
-5-
P.013
2.12
Scope of Business. CIC expects to invest approximately US$8-10 million annually in, perhaps, 4-8 projects. In addition, the Company would anticipate earning fee income for its advise and assistance in promoting and structuring projects. In most cases, CIC will have a direct equity investment or other form of profit participation in addition to any loans which are rade. Virtually all of CIC's project investments will be in joint venture companies, which in many instances provide for an automatic sale of the foreign partners equity to the Chinese party on termination of the joint venture. In cases where there is no such automatic mechanism, CIC will normally seek to negotiate some form of "put" to either the other foreign investors or the PRC partner, In its efforts to identify and negotiate project investments CMC will rely on Jardine Fleming for certain corporate and administrative support and on Jardine Matheson, especially its offices in the PRC, for other field support and contacts in Hong Kong and in China, in addition to its own small staff.
2.13 Operating and Investment Policies. The investment policy is intended to ensure a diversified portfolio of projects (not more than 10% of net assets in any one project or group and not more than 25% of CIC'e net assets in any single industry) and a reasonable balance between debt and equity exposures. CIC's aggregate equity investments may not exceed its own net worth, including Subordinated Loan Stock, and borrowing, if any, should not exceed two-thirds of the Company's portfolio investments, net of any provisions for losses.
III. THE MARKET
ECONOMY 1/
3.01
Since 1978, China has undertakes extensive domestic economic reforms in both rural and urban areas, as well as in the external sector. These reforms have helped to stimulate a rapid development of the economy, as real GDP growth has averaged 5% p.a. between 1978 and 1981 and 10% p.a. between 1981 and 1985. As a result of further government reforms, emphasizing decentralized decision making, and an expansionary macroeconomic policy China's economy grew by 12% in 1985 and 8% in 1986. China's agricultural sector has led the country's strong growth performance, with gross agricultural output value (excluding rural industry and commerce) rising at nearly 11% p.a. between 1981 and 1985. Gross industrial output value grew at over 10% p.a. during the same period, with heavy industry growing somewhat faster than light industry (12% p.a. vs. 9% p.a.). If rural industrial output is included, gross industrial output value grew at close to 12% p.a. in real terms between 1981 and 1984. China's manufactured exports grew at 82 p.a. between 1981 and 1985.
1/ For more detail see the Country Brief circulated with Bank Report No.
P-4378-CHA. (March 1987)
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