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China is stepping up its capital support to enhance international competitiveness among domestic contractors.

The Ministry of Commerce yesterday issued a supplementary notice to the temporary regulations regarding the management of underwriting risk funds for contracted overseas projects.

The notice is part of China's strategy to encourage domestic companies to go abroad and the fund is to be used to guarantee domestic contractors undertaking overseas projects.

The notice relaxes prerequisites for domestic contractors to apply for the fund - all firms with total assets of 80 million yuan (US$9.66 million) and over, owner's input of 15 million yuan (US$1.81 million) and over and which have been profitable for two consecutive years are to be able to apply.

Each firm can be underwritten for up to US$40 million in outstanding amounts, according to the notice.

In a recent international seminar on encouraging Chinese companies to go abroad, Wu Xilin, vice-director of the international economic co-operation department of the Ministry of Commerce, said China has made big progress in the past few years in terms of the number of contracted overseas engineering projects and their technological content and scale.

China's contracted overseas projects are mainly in infrastructural construction fields such as house-building, transportation and electricity, and rarely in technology- and capital-intensive industries including manufacturing, processing, environmental protection, water supply and drainage.

The quality of the contracts is mainly due to the fact that the majority of Chinese contractors are small in scale and weak in capital strength and capacity of research and development and technological innovation, said a senior official with the Beijing-based China Association for Overseas Engineering Project Contractors.

Chinese contractors also lack professional talents in international engineering and lag behind in corporate management and the application of information technology, he said.

The official, who declined to be named, said he expected increases in the amount of engineering projects in infrastructural construction, information technology, water supply and environmental protection in the world in the next few years and called for the Chinese Government to help nurture growth of Chinese contractors in these fields.

Besides capital support, the official said the government should have preferential policies in importing and exporting for these firms, because they could promote exports of domestic equipment, materials, labour services, management and technologies.

He said the government should improve the business environment, enhancing relative laws, rules and economic mechanisms as well as financial, insurance and information services.

In order to increase competitiveness in the international market, Chinese contractors, mostly State enterprises, should carry out reform of their corporate mechanisms, do more research into development strategy and pay more attention to management techniques, he said.