Mainland China steps up consolidation

Mainland China steps up consolidation
Published: 07 September 2010

Mainland China renewed its effort yesterday to consolidate key industries - such as cement, steel and vehicles - by issuing measures that would allow more private capital to invest in key sectors and permit company mergers across provincial borders.

For several years the central government has with little success been urging companies in the vehicle, cement, steel, machinery, rare earth and aluminium industries to consolidate through mergers and acquisitions. The goal is to form several giants in each sector that can compete globally.

The State Council announced yesterday that private companies and private capital, which had been limited to minority stakes, would be permitted to take a larger share in some companies, although it was not specific about size.

The State Council will also encourage cross-provincial mergers and acquisitions. Such combinations were difficult in the past because local governments disagreed on which companies would be merged because it meant lost jobs and tax income and a reduction in gross domestic product.