The merger between state-owned conglomerates China Electronics Corp (CEC) and China Great Wall Computer Group Co, announced on Monday, could herald large-scale mergers and acquisitions in the state sector, according to analysts.

The state-owned Assets Supervision and Administration Commission (SASAC) confirmed the move along with two other reshuffles in a short notice posted on its website.

The merger, which will create a company with assets of more than US$6 billion, could potentially speed up regulators' efforts to reshuffle industries such as the telecom sector, said Eagle Zhang, general manager of research house Analysys International's consulting division.

Chen Zhaoxiong was vice-president of CEC before he became chairman of the Great Wall Group last May, a job change engineered by the SASAC and believed to have been designed to help the merger.

The SASAC swapped the top executives of the top four listed telecom carriers, China Mobile, China Unicom, China Telecom and China Netcom, last November. Analysts said the move might be a prelude to the reshuffling of the domestic telecom industry.

Zhang said it was possible to merge the top four telecom operators into three firms, although it might be "painful" at the start. "I think it is a good option to split up China Unicom's cellular networks and merge them with other operators to better utilize state-owned assets."

The analyst said he believed the SASAC, the regulator of state-owned assets, will push consolidations in various sectors to reduce redundant companies.

Wang Xiaochu, general manager of China Telecom, has publicly proposed to buy one of the networks run by China Unicom.

SASAC minister Li Rongrong has said the domestic telecom sector will "definitely" be restructured.

But Wang Guoping, an analyst with China Galaxy Securities, said it would be very difficult for the SASAC to consolidate the four telecom carriers as they are all listed overseas.

CEC and Great Wall were suffering from heavy losses or underperforming in the market, but the top four telecom carriers are ringing up profits, and some may resist a reshuffle.

The merger of China Harbor Engineering Company (Group) Co. and China Road & Bridge Corporation to become China Transportation Engineering Co. Ltd. and the incorporation of China National Medical Equipment & Supplies Import and Export Corporation into China National Biotec Corporation were also confirmed by the SASAC on Monday.

The latest moves have reduced the number of SASAC-supervised enterprises from 172 to 169.

(China Daily August 3, 2005)