By Li Qiaoyi

Chinese businesses in Libya are likely to suffer greater losses, as some domestic commercial banks have already made compensation claims against some Chinese enterprises that have operations in Libya, a local newspaper reported over the weekend citing company insiders.

Sahara Bank, part of the French-based BNP Paribas group and one of the largest banks in Libya, has filed compensation claims for advance payment guaranteed by the bank against several Chinese companies, demanding these companies send a formal reply back to the bank within five days, the 21st Century Business Herald reported, citing an unnamed source from China Gezhouba Group Corp, a State-owned engineering and construction company.

Companies impacted include China Gezhouba Group Corp, Sinohydro Co, and Beijing Hongfu Construction and Engineering Group, according to the source.

The bank's claim is malicious in nature, as there is still half a year before the guarantee expires, the newspaper said quoting an anonymous source. An advance payment guarantee is for use where local Libyan developers make advance payments to Chinese enterprises engaging in contracted projects, and get bank guarantees to hedge risks against that payment. But given Libya's current unstable situation, it is improper for local banks to file claims at the moment, which would cause great losses to Chinese companies with investments there, Huo Jianguo, director of the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, told the Global Times on Sunday.

Sahara Bank offered two choices to concerned Chinese companies: To either repay the principal and interest of the advance payment or postpone the deadline of the guarantee to the end of next year, the source said, while arguing that both would lead to greater losses. The bank has made a compensation claim of about 400 million yuan ($61.00 million) against Beijing Hongfu Construction and Engineering Group, the newspaper reported citing Liao Liying, an official with the company.

The claim against China Gezhouba Group is the highest among all concerned companies, the unnamed source from the company said, without revealing exact figures.  Concerned companies have reviewed the issue with the Ministry of Commerce, hoping Libyan banks could terminate the guarantee while ensuring Chinese firms' credit ratings would not be affected, the paper said.