2016年CRI China's state-run sector is set to lose more weight

One of the most high-profile headlines on China's state-run sector 1 this year is a planned merger 2 between Shanghai-based Bao Steel and another steel company based in the central Chinese city of Wuhan.

Both companies, owned by the central government, are already among the biggest steel producers in the country.

It is estimated that the new business after the merger will have a steel capacity of at least 60 million tons per year.

Chen Derong, general manager of the Bao Steel, says the merger is paving roads to something that China's steel industry can be proud of.

"With this pioneering merger, I can tell you that a new round of merger and acquisition has kicked off in China's steer 3 sector. After the shuffling 4, China will also boast of a steel business like the world's leading steel producer "Arcelor Mittal", which has hundreds of millions of annual capacity."

This merger in the steel sector is not an isolated 5 case.

Currently China has 105 central government-owned enterprises.

The country is hoping to reduce the number to somewhere below 100 by the end of this year through mergers 6 and acquisitions.

Agricultural trading firm COFCO announced plans to buy up textile manufacturer "Chinatex Corporation" last month.

In the same month, a joint 7 statement from the Beijing-based CITS Group Corporation and Hong Kong-based China Travel Service Group Corporation said the former will become a subsidiary of the latter in a move to create the largest tourism company in China.

The weight-losing schedule, however, is not just targeting central government-owned businesses.

Around 50 enterprises run by regional governments suspended trading on the stock market as a result of their merger or acquisition plans from January to July this year.

Xiao Yaqing, the top official in charge of the monitoring of China's state-owned assets, says the state-owned enterprises now have a clearer idea about what areas they should focus on.

"More and more state-run assets are concentrating on the areas which are strategically important for the country. In areas such as military industry, telecommunication 8, aviation and energy, state-owned firms are now accounting 9 for more than 90 percent of businesses."

Reduction of the overall size is by no means the only remedy to solve the problems facing the state-run sector.

The sector has yet to deal with challenges like a lack of innovation and professional business managers.

Economists 10 also believe the sector will need to attract more investment from private businesses in order to encourage more competition.

But common sense tells us when a person is riddled 11 with excessive weight; he or she can hardly perform any other task.

The same could also be true for the state-run sector.

For CRI, this is Ding Heng.