In spite of Chinese government declarations aimed at curbing excessive industrial investment, a major glassmaker has succeeded in obtaining a CNY 1.2 billion loan from a state bank in order to increas…
In spite of Chinese government declarations aimed at curbing excessive industrial investment, a major glassmaker has succeeded in obtaining a CNY 1.2 billion loan from a state bank in order to increase its soda ash production by 50%. Zhejiang Glass has managed to secure financing on preferential terms because it is in the western province of Qinghai, whose development is a priority for Beijing. The company will increase its investment in the new plant from CNY 800 million to CNY 1.5 billion and its annual production capacity of soda ash will go up from 600,000 to 900,000 tonnes. The firm has secured a zero-interest deal on part of the loan, while the remainder will be charged at a 20% discount to the capital market rate, according to Zhejiang Glass chairman Feng Guangcheng. “We expect the government to give approval for the project this month,” Mr Feng said. The company, which had a cash balance of just CNY 150 million as at June 2003, proposed building the soda ash plant in the northwestern province last year to secure long-term supplies. Due to start operation in 2005, a Nomura research report estimates earnings from the plant of CNY 31 million in the first year and CNY 143 million in 2006. Mr Feng said low raw material and fuel costs in Qinghai would offset higher transportation costs to the firm“s factory in coastal Zhejiang province. Supply restrictions have forced soda ash prices up by 50% to CNY 1,350 per tonne while glass prices have risen by about 22%.