China to merge 25 SOEs, mostly in nonferrous metal field

BEIJING, Jul. 2, 2010 （Xinhua News Agency） -- The Chinese government will reduce the current 125 state-owned enterprises （SOE） to less than 100 by the end of 2010, said Li Rongrong, head of State-owned Assets Supervision and Administration Commission （SASAC）.

This means that at least 25 state-owned companies will be merged in the second half of 2010.

The State Council, or the Cabinet, urged more efforts be made to promote mergers and acquisitions （M&A） of China's state-owned enterprises in a statement released after an executive meeting chaired by Premier Wen Jiabao on Wednesday. The meeting decided to set up a special fund to support M&A of SOEs.

Also, a wide variety of regulations hindering the merger of enterprises and the reorganization and obstructing fair competition should be eliminated, along with regulations created by local governments seeking to keep enterprises of other localities from acquiring and reorganizing their own firms, said the statement.

According to the adjusted target for state-owned enterprises made by the SASAC under the guideline of the State Council, China will cut the number of state-owned enterprises to 80-100 by the end of 2010, and cultivate 30-50 large groups with strong international competitiveness.

Li Rongrong repeatedly emphasized that state-owned economy should have absolute control on important industries concerning national security and economy, which includes electric power and power grid, petroleum （OTCBB:GRPR） and chemical, telecommunication, coal, aviation, and shipping.

Thus enterprises in the above sectors are likely to usher into an upsurge of mergers and acquisitions, and assets injection to listed companies. The M&A are expected to mainly occur in SOEs in the fields of nonferrous metal and coal as well as in commerce, predicted Wang Zhiyong, analyst with Bohai Securities.