Zhang Jie, board director and general manager of CTMC, told China Daily yesterday the company is undergoing shareholder diversification..

"The diversification plan has won approval from the State Council and we have begun dealing with the details," Zhang said.

Three new shareholders will buy into the company. They are the Cinda, Huarong and Dongfang assets management companies.

The restructuring will take the form of a debt-to-equity swap, Zhang said, adding that the drastic reform aims to absorb advice from several sides and improve management of the State-owned company.

CTMC is also mulling over offering a management buy-out (MBO) in order to attract high-level managers, Zhang said.

A professional company has been entrusted to write out the MBO plan, he added.

The company is also seeking financing channels for the MBO since the managers are all short of funds to buy shares, Zhang said.

As head of a big State-owned company, Zhang expressed his willingness to co-operate with foreign counterparts.

"We can even join hands by holding each other's shares," Zhang said.

CTMC possesses advanced equipment with a large production capacity, which is what foreign companies need, Zhang said.

Many foreign companies prefer setting up fully foreign-funded factories, but these may not have success in China, he said.

Increased imports and more local manufacturing of textile machinery by foreign companies have put heavy pressure on the domestic industry since China entered the World Trade Organization in December.

Zhang said the advantage of foreign textile machinery makers lies in advanced technology.

The Chinese producers' competitive edge lies in low costs, good customer relations and a large industrial scale.

The domestic companies will lose their edge in low expenses if foreign counterparts localize their production and make use of China's low labour costs, Zhang said.

As a result, CTMC has stepped up its development of new technology and set up a professional research and development house called Hongda Research Institute Co Ltd.

In addition, CTMC is introducing its newly developed machinery at the China International Textile Machinery Exhibition which opened yesterday.

For the first time, CTMC has grouped its subsidiary companies to show at the 21,000-square-metre exhibition.

Zhang said these new machines are all close to advanced world levels and should change imported machinery's monopoly of the top-level equipment of the industry.

Zhang predicted that imports will increase by 20 percent this year and that exports will keep level with last year. He also said he expects CTMC's revenue to increase dramatically this year after the acquisition of a counterpart scheduled for later this year. Zhang declined to disclose its name.

"More acquisitions will happen next year," Zhang added.

Besides the acquisition, CTMC will float Zhengzhou Textile Machinery Co Ltd, one of its biggest companies.

According to Liu Haitao, general manager of Zhengzhou, the company will go public in early 2004 after a one year coaching period.

The company is a leading textile machinery maker in the chemical fibre area.

(China Daily October 16, 2002)