Report: China to Merge Scores of Major State Firms

China is considering merging scores of its biggest state-owned enterprises to create around 40 national champions from the existing 112, the official Xinhua news agency said Monday.

The report said state firms would be merged or acquired, but gave no timelines or details about which companies would merge. 

But it said the M&A would help build a stronger competitive edge among the SOEs and prevent cut-throat in-fighting, which was causing many of the Chinese giants to lag behind their foreign counterparts.

"The State-owned Assets Supervision and Administration Commission has issued an internal document to promote the process," Xinhua quoted an unidentified source as saying. 

SASAC manages state-owned assets of enterprises under the direct supervision of the central government, which now number 112, according to its website.

The government agency could not be immediately reached for comment.

Although China has made the state sector far leaner since the late 1990s, government-backed companies still dominate large sectors of the economy such as energy and telecommunications.

A reduction in the number of state firms would follow a 2013 Communist Party meeting known as the Third Plenum, at which leaders pledged to loosen the state's grip over the world's second largest economy by allowing the market to play a decisive role.

China's top two train makers, state-owned China CNR Corp. and CSR Corp., last year announced they would combine into a single huge conglomerate to compete with foreign players and prevent in-fighting between them.

But the nation’s two biggest oil companies Sinopec and China National Petroleum Corp (CNPC) earlier this year denied a similar plan for a future merger between them. 

Media reports at the time said that the government intended to restructure the energy industry.

As part of recent economic reforms, a Sinopec unit sold a 30 percent stake in its marketing arm to outside investors for more than $17 billion, while a CNPC subsidiary unveiled plans to spin off part of its pipeline business.

Speculation about a wave of mergers and acquisitions helped send China's benchmark Shanghai Composite Index up more than three percent on Monday to a more than seven-year high, with energy firms among the biggest gainers, analysts said.