China offers investors a massive market and booming growth

Demand among investors for Chinese companies has surged as economic growth exploded to more than 8% a year.

The country's banking industry, however, has been blighted by years of bad lending, saddling the companies with masses of unpaid loans.

China's top four banks estimate that about one in five loans is bad.

Much higher

Analysts, however, reckon the real figure is much higher after many banks were forced to underwrite unprofitable state-run companies.

State-owned Bank of China and China Construction Bank received the 45bn, taken from the country's foreign currency reserves, at the end of last year.

That should bring their bad loans down to about 10% of total lending. Ideally, that figure would drop to single digits before any stock market listing.

The Chinese government has said it plans to bring its four biggest banks to the market in 2006, though there have been signals that it may happen more quickly.

Investors are keen to get exposure to one of the world's fastest growing and largest markets.

Shake off

At the same time, the government wants its leading industries to shake off an image for bad management and cronyism.

When shares in China Life, the country's biggest life insurance company, began trading in New York last year, they surged by almost 30%.

The $3bn flotation was the biggest in the world last year.