China to speed up mergers among auto makers

Shanghai, August 26 (Gasgoo.com) China will speed up mergers of its state-owned enterprises (SOEs) in the second half of the year and accelerate sales of non-strategic assets across a wide range of sectors, says State-owned Assets Supervision and Administration Commission (SASAC), reported the Economic Observer.

Li Rongrong, chairman of SASAC, indicated mergers will be increasingly decided directly by SASAC. "The need for consolidation is not limited to SOEs. All enterprises in our country, no matter what their ownership structure, are faced with this task," he said in a recent government meeting in Beijing.

The report says SASAC made the decision because many centrally-administered SOEs lack economic scale and are not competitive enough in the current market environment. 

It takes the auto industry for an example. Chinese auto enterprises such as Jianghuai Automobile (Group) Co and Changan Automobile were hurrying up to develop their sedan products in recent years, but the result is not at all positive because of product repetition.

Several talks on merger are going on currently without much progress. Dongfeng Motor recently failed in its attempt to acquire Harbin Hafei Automobile, whose major shareholder AVIC II has decided to operate automobile business on its own.

Similar talks between Guangzhou Automobile Group and Changfeng Motor Company, between FAW Group and Brilliance also didn't produce any desired effect.

Government-sponsored consolidation is much needed in the case to help Chinese producers pool resources to compete with bigger, richer foreign rivals, says the report.