By Benjamin Kang Lim

BEIJING, Aug 26 (Reuter) - China said on Tuesday it would not open its massive telecommunications market to foreign firms but would raise more money overseas to finance the industry's insatiable expansion.

``At present there is still difficulty ... because the conditions now are not ripe,'' Post and Telecommunications Minister Wu Jichuan said.

``As minister of posts and telecommunications, I cannot share with foreign businessmen profits that were brought through government policy,'' Wu said when asked at a news conference if China would open the sector to foreign firms.

Beijing does not allow foreign firms to operate telecommunication networks in the domestic market but needs huge amounts of capital to expand its services.

China Telecom, operating arm of the ministry, has agreed to buy a 5.5 percent stake in Hong Kong Telecommunications (0008.HK) from the Hong Kong company's British parent, Cable & Wireless Plc (CW.L).

The deal has sparked speculation that Cable and Wireless could gain entry into the China market.

Wu defended the ministry's decision not to lift a ban on foreign investment in the telecoms sector, saying there was a dearth of laws to guarantee fair competition.

One problem was that the post and telecommunications sectors had not been separated and foreigners would shy away from the money-losing postal sector, he said. Also, China has yet to deregulate prices, he said.

Wu said foreign investors also would not pour money into money-losing projects in poorer regions, such as the 2,754-km (1,700-mile) optical fibre line between Lanzhou, capital of the northwestern province of Gansu, and Lhasa, capital of the Himalayan region of Tibet.

``I think we still cannot find one foreign company in the world now that would be willing to do the project,'' Wu said.

The Lanzhou-Lhasa optical fibre line, costing 612 million yuan ($73 million), is due to be completed and become operational in December 1998.

However, Wu did hold out hope for foreign investors in the longer term.

``We ... are actively preparing and creating conditions'' to eventually open the telecoms market to foreign investment, he said.

Wu said China aimed to boost the number of homes with telephones to 10 percent nationwide and 30-40 percent in urban areas by the year 2000.

China had 72 telephones per 1,000 people by end-June, with coverage in urban areas at 240 telephones per 1,000 people.

``We will use various methods to raise funds to accelerate expansion,'' Wu said.

Wu said China's telecommunications industry had so far obtained $6.6 billion in foreign government loans.

He confirmed that shares in China Telecom (Hong Kong) would be listed in Hong Kong, but he would not comment on the timing or size of the listing.

``This company... is actively preparing (for listing),'' Wu said. He said Hong Kong securities regulators would announce the listing date and size.

Turnover in China's postal and telecommunications sector hit 80.91 billion yuan ($9.75 billion) in the first half of this year, up 32.9 percent compared with the year-earlier period.