FINANCING TRADE - GORDON PLATT CITIBANK SAYS CHINA NEEDS MORE INCENTIVES FOR FOREIGN INVESTORS

FINANCING TRADE - GORDON PLATT CITIBANK SAYS CHINA NEEDS MORE INCENTIVES FOR FOREIGN INVESTORS

China will need to offer more concrete incentives to foreign investors in order to effectively channel foreign investment, Citibank said.

Citibank, which was recently granted permission to operate a branch in Beijing, proposed in a quarterly newsletter suggestions for China to maintain its attractiveness amid growing competition from other developing countries in Asia, such as India and Vietnam."Most foreign investors tend to value, in addition to low-cost labor and abundant natural resources, other factors such as stable economic and political environments, favorable operating conditions, and transparent government policy," the U.S. bank said. "If China can improve its attractiveness in these latter areas, it could stand a better chance of securing more foreign direct investment."

The main difficulty currently encountered by foreign investors is the shortage of local currency funds, a result of China's tight control of the money supply, which aims to slow down the heated economy, Citibank said.

The bank's new Beijing branch, the first authorized for a U.S. bank, will offer cash management and foreign exchange products, along with trade finance, lending and financial advisory services. Foreign investors are being denied access to the nationwide China Foreign Exchange Trade System, but "this is expected to change," the bank said.

Citibank said China also intends to upgrade its infrastructure facilities and strengthen its legal framework supporting commercial undertakings.

EXPORT ASSISTANCE CENTER OPENS IN NY

U.S. Commerce Secretary Ron Brown cut the red ribbon Monday to inaugurate the U.S. Export Assistance Center at 6 World Trade Center in New York.

The new office is part of a network of regional export centers that have been established across the country to help local businesses export.

Wasn't it ironic that this new effort to create jobs through exports was being launched at the same time budget-cutters in Washington were taking aim at the export promotion agencies? Mr. Brown was asked.

"It's not ironic - it's ludicrous," he said. Meanwhile, efforts to dismantle the Commerce Department will fail, he predicted. "It would be unilateral disarmament in trade."

The new export assistance center consolidates the export promotion and trade finance services of the Commerce Department, the Small Business Administration and the U.S. Export-Import Bank under one roof.

Philip Lader, SBA administrator, said Marine Midland Banks (a unit of

Hongkong & Shanghai Banking Corp.) is the most active participant in the SBA's Export Working Capital Program, which provides pre-export financing of labor and materials used in the manufacture of goods for export, or to purchase goods or services for export.

IRS MAY BE TAXING FOREIGN BANKS TWICE

The U.S. Internal Revenue Service should change its policy on transactions between branches of foreign banks, tax experts said.

The current approach distorts financial results and is increasingly at odds with the growing trend toward trading in international capital markets, they said.

Stephen M. Brecher, international banking partner at KPMG Peat Marwick LLP, said the U.S. policy "is becoming increasingly untenable, since funds loaned or borrowed between branches and the related income or expense is disregarded."

An approach that treats a foreign bank branch and its head office as separate entities would recognize inter-branch dealings for tax purposes, Mr. Brecher said. This approach is recognized by the vast majority of countries within the Organization of Economic Cooperation and Development and many non- OECD financial centers, including Singapore, he said.

"Failure to recognize inter-branch transactions also raises the possibility of double taxation," Mr. Brecher said.