According to a report by China's state media on Monday, the Chinese government is working out on several mergers of state-owned firms that may lead to the reduction of 40 companies as China strives to create the right policies to support the world's second-largest economy.
The commercial sector will first experience the merger, but bank and transport industries will remain stable.
In a report by Economic Information Daily, China owns 112 conglomerates, including 277 public firms listed on the Shanghai or Shenzhen stock exchanges with a market capitalization of more than 10 trillion yuan ($1.06 trillion).
Resources will be increasingly concentrated on large enterprises to avoid cutthroat competition, like what CSR Corp. Ltd. and China CNR Corp. Ltd. did when competing against each other for projects overseas, Reuters reported.
The then rivals are two of the largest trainmakers in China who merged in the latter part of 2014 to create a $26-billion mega company which will provide locomotives and rolling stock for the Chinese and world market.
Losing state assets is what the central government is avoiding, as it is "the most important and core requirement," the state media reported.
As China is advocating good governance, the performance and financial statements of the state firms are being reported to the public.
A series of changes in the enterprise administration is also taking place.
A two-year inspection of the state firms in different sectors was also strengthened by China's Central Commission for Discipline Inspection, the highest internal-control institution tasked to enforce internal rules and regulations as well as fighting corruption, Beijing Times reported.
The news site added that Xu Jianyi, chairman of the state-owned automotive manufacturing China FAW Group Corp.; Cui Jian, vice president of Baosteel Group; as well as the general manager of China National Petroleum Corp. have been under investigation in the past weeks due to alleged corruption.