Two of China's largest State-owned engineering and construction corporations suspended trading of their shares on Monday to prepare for a merger as part of the national government's drive to deepen reform of State-owned enterprises (SOEs).
China Railway Group issued a statement late Sunday night, announcing it would suspend its stock trading starting on Monday because the company is preparing for a "major capital merger"with its subsidiary, China Railway Erju Construction Co.
Considering significant uncertainties associated with the matter, the company decided to suspend trading starting on Monday to prevent abnormal fluctuation in its share price and protect investors' interests, according to the statement.
China Railway Erju announced its own trading halt in a separate statement late Sunday night, citing similar reasons.
Neither company provided further details, but both promised to "settle the matter" within five days and resume trading of their shares.
The move immediately drew intense attention, as it came just after the government unveiled a top-down plan for further SOE reform. The central government issued guidelines on Sunday to deepen reforms targeting 150,000 SOEs, aiming to improve corporate governance and the management of their assets.
The guidelines said SOEs should be classified as either commercial companies or public service providers. They also called for a shift toward the management of State capital instead of State enterprises, giving companies' management full play in operations.
Neither of the railway companies mentioned the guidelines.
However, media reports suggested that the guidelines provided an occasion for the companies to pursue structural reform, which they have reportedly sought to do for more than one year.
