China to reduce number of central SOEs to 40

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State-owned Assets Supervision and Administration Commission (SASAC) said that the next plan of State-owned enterprises (SOEs) reform process will be to reduce the number of SOEs to 40 through mergers and acquisitions, the Economic Information Daily reported on Monday, citing an authorized source.

The SASAC has issued documents concerning central SOEs rearrangement, the newspaper said, adding that this round of consolidation will focus on commercial SOEs, especially the fully competitive industries, further concentrating resources on large companies.

Currently, the central government directly administers 112 SOEs, among which 227 unit companies are listed on the A-share market, with a total market capitalization of 10 trillion yuan ($1.61 trillion).

This round of M&As will intensify main businesses, meanwhile it will be a more open and market-oriented reform avoiding administrative allocations, the source said. For example, the non-core businesses of central SOEs, especially the tertiary industry, will be sold to the public through the capital market.

Last year, China's central reserve food company China Huafu Trade & Development Group Corp integrated into COFCO Corp to become the latter's wholly owned subsidiary. COFCO is China's largest food manufacturer and a Fortune 500 company, with assets exceeding $57 billion.

Last month, shareholders of CSR Corp and CNR Corp approved a proposed merger of the two companies, paving the way for the establishment of the world's largest maker of rolling stock with annual revenue of more than $30 billion.

In 2014, central SOEs directly under the SASAC saw their combined profits hit 1.4 trillion yuan ($225.89 billion), up 4.2 percent year on year, latest data showed.

Profits last year had the highest growth rate in three years, compared to 3.8 percent in 2013 and 2.7 percent in 2012. Total business revenues of the centrally administered SOEs hit 25.1 trillion yuan last year, up 3.8 percent.

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