In the latest in a growing number of syndicated financings for Chinese corporations, First Chicago NBD Corp. has arranged a $45 million loan for China Ocean Shipping Co., the Chinese state-owned shipping corporation.
Paul S. Muther, managing director at CCIC Finance Ltd., First Chicago's Hong Kong-based merchant banking joint venture with Bank of China, said he expected the transaction to be closed by Friday. He declined to provide any details in advance of a formal announcement of the deal, but said that CCIC is considering seven more China-related transactions.
First Chicago, the Bank of China, and the Industrial Bank of Japan own 30% each of CCIC. China Resources holds the remaining 10%.
Since it was set up in 1980, CCIC has arranged more than $5 billion in commercial paper programs, loans related to trade finance, and longer-term loans for Chinese companies and multinational corporations investing in mainland China.
Typical loans are for $15 million to $75 million and range from one to five years. Much of the business is obtained through referrals from First Chicago's branches in Beijing and Hong Kong or from other partners in the merchant banking joint venture.
Mr. Muther predicted that borrowing demand from Chinese corporations will stay strong despite the ongoing currency and stock market crisis in several Asian countries.
"China is the big engine of growth in Asia, and something growing that big and that fast will continue to need a lot of capital in the form of both debt and equity," he said.
"The likelihood of a big change in that high growth rate is fairly low."
But he also noted that syndicating loans might become more difficult.
"A number of banks, especially those with headquarters outside the region, will be more cautious about participating in lending - not out of concern about China, but out of general concern about Asia."
He also suggested the commercial real estate in China, much of it financed by Hong Kong and Taiwanese investments, may be overheating.
"There's definitely vulnerability in the office building market," Mr. Muther said.
The banker said CCIC is expected to post 1997 net profits more than 20% higher than last year's $2.7 million, but that the improvement next year might not be as good.
