China to Merge State Owned Enterprises

China will likely cut the number of its central government-owned conglomerates to 40 through a series of mergers, as Beijing pushes forward a plan to overhaul the country’s underperforming state sector, state media reported on Monday.

Currently, the central government owns 112 conglomerates, including 277 public firms listed on the Shanghai or Shenzhen stock exchanges with a market capitalization of more than 10 trillion yuan ($1.6 trillion), according to the official newspaper Economic Information Daily.

The consolidation will first take place in commercial sectors, especially in competitive industries, the paper said quoting an anonymous authority.

“Resources will be increasingly concentrated on large enterprises to avoid cut-throat competition, like what CSR Corp Ltd (601766.SS) (1766.HK) and China CNR Corp Ltd (601299.SS) (6199.HK) did when competing against each other for projects overseas,” the paper said.

Stocks jumped to fresh seven-year highs on the report, led by heavyweights such as China Petroleum & Chemical Corp (600028.SS) and PetroChina Co Ltd (601857.SS).

Sinopec Corp (0386.HK) and PetroChina (0857.HK) late on Monday dismissed media reports their parents would merge to create a state giant, saying they have never received any official information about such a restructuring.

This is the first time Sinopec, Asia’s largest refiner, and PetroChina have formally downplayed Chinese and foreign media reports over the past few months that Beijing is considering merging Sinopec’s parent with China National Petroleum Corp, which controls PetroChina.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza