China unveils merger targets to upgrade industry

The government has set targets to increase the number of mergers in nine sectors to reshuffle China's industrial structure and enhance big enterprises' global competitiveness.

The Ministry of Industry and Information Technology (MIIT), along with 11 other authorities, said in a guideline Tuesday that the government is encouraging mergers in the automaking, steel, cement, shipbuilding, electrolytic aluminum, rare earth, electronic information, pharmacy and agricultural sector.

Zhu Hongren, MIIT chief engineer, said economies of scale play an important role in these sectors, but scattered and outdated production capacity led to redundant projects and an overcapacity problem.

The guideline says the government aims to incorporate production capacity in the coming years and upgrade industrial structures in order to increase enterprises' international competitiveness.

Zhu said China welcomes foreign capital to hold stakes in related enterprises or engage in mergers under supervision.

China aims to foster three to five large automakers with core competitiveness, and increase the concentration ratio of top ten auto makers to 90 percent by 2015, according to the guideline.

Concentration ratio, the measurement of industrial concentration, indicates the degree of market dominance in a sector by a few large enterprises.

China will fully support the development of home car brands and encourage them to go overseas for cross-border mergers, the guideline says.

At the same time, the country will work to cut a large number of steel producing enterprises and phase out outdated capacity through mergers, in a bid to raise the concentration ratio of top ten steel producers to around 60 percent by 2015.

China will also slash the number of firms in the rare earth business through mergers and concentrate production capacity in the sector into a number of large enterprises, the guideline says.

The country aims to promote mergers in the remaining six sectors, and will try to raise the concentrate ratios of leading enterprises in those fields by 2015.

In November, Xi Jinping, general secretary of the Central Committee of the Communist Party of China, said the country will step up efforts in industrial structure adjustment in 2013.

A central economic work conference in December agreed that the government would work to adjust industrial structure and resolve overcapacity problems that have hobbled some sectors.