Ministry proposes more mergers in key industries

Measures aim to increase global competitiveness and efficiency

Companies across nine of China's key industrial sectors are being encouraged to increase their merger activities in an effort to become more competitive overseas, and more efficient.

According to a document released on Tuesday by the Ministry of Industry and Information Technology, jointly with 11 other ministries, the "guideline for merger and reorganization of key sectors", also proposes various industrial fine-tuning measures to cut, for example, price competition and surplus production, and the duplication of research and development.

The industries being targeted are steel, automotive, cement, shipbuilding, electrolytic aluminum, rare earths, electronic and information, pharmaceutical, and industrialized agriculture.

"A common feature of these nine industries is their economies of scale," said Zhu Hongren, chief engineer of the MIIT.

However, he said these sectors also have defective structures, isolated enterprises, and lack sector leaders, which results in problems such as duplicated development activities, surplus production and vicious price competition.

"Promoting mergers and reorganizations will help improve the efficiency of resource allocation, adjust and optimize industrial structures, and improve the global competitiveness of key enterprises," he said.

In the automotive sector, for instance, the new guidelines call for the production of the top 10 automakers to account for 90 percent of the industry's total amount.

The guidelines also promise to create three to five large auto corporations that will be encouraged to focus on exploring global markets.

Zhang Qizi, assistant director of the Institute of Industrial Economics at the Chinese Academy of Social Sciences, said the targets being put forward by the authorities were sensible and reasonable, as China currently lacks large enterprises that can be fully competitive on a global scale, especially in manufacturing sectors.

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