Number of central SOEs nearing 100

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China moved one step closer to reducing the number of centrally administered State-owned enterprises to 100, after Sinolight Corp agreed to merge with China Poly Group Corp.

China Haisum Engineering Co Ltd, a listed arm of Sinolight, said in a regulatory filing that the latter had signed a restructuring framework agreement with property group China Poly.

It said discussions were continuing and gave no further details.

The move comes as the country drives through consolidation in many of its SOEs, including the railway, shipping, construction materials and steel sectors.

The merger requires regulatory approval, but would not affect normal operations, according to Tuesday's filing.

The announcement was released right after merger plans for two of China's nuclear power developers were announced.

The Shanghai-listed units of China National Nuclear Corp, a holding company for reactor design and technology, and China Nuclear Engineering Corp Group, a company focusing on construction, said in regulatory filings that a strategic reorganization of the two nuclear behemoths was under way.

The merger plan of the country's two nuclear heavyweights aims to help China's nuclear companies to boost exports of their technology to the international market.

After the two mergers are completed, enterprises listed under the State-owned Assets Supervision and Administration Commission will be reduced to 100 from the current 102, according to the commission's website.

Peng Huagang, deputy secretary-general of the commission, said last July at a press briefing that mergers between SOEs were accelerating to better streamline their operations and boost efficiency, with the number expected to drop to 100 from the then 106.

The country launched a far-reaching reform drive aimed at improving the competitiveness of the sprawling and inefficient State-owned sector, utilizing mergers and share sales and closing loss-making zombie companies.

Zombie companies are economically unviable businesses, usually in industries with severe overcapacity, which only survive due to financing from the government and banks.

China's centrally administered SOEs performed well in the first two months of this year, according to Xiao Yaqing, head of the commission, with combined profits surging 29.1 percent year-on-year to 168.6 billion yuan ($24.37 billion).

The country's current 102 central SOEs saw revenues increase 15.2 percent to 3.7 trillion yuan in the same two months. Xiao said the strong growth was the result of reductions in cost and management expenses.

China pledged to deepen SOE reform in 2017, promising measures such as introducing a mixed ownership system and more efforts to make SOEs leaner and healthier, especially in the steel, coal and power sectors.

The latest merger will lead to a boost in internal efficiency as well as external competitiveness, said Joseph Jacobelli, a senior analyst of Asian utilities and infrastructure at Bloomberg Intelligence.

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