The Chinese government is working on a plan to combine its two biggest shipbuilders to create an industrial giant that would dwarf its South Korean rivals, according to people with knowledge of the matter.
The State Council, China’s cabinet, has given its preliminary approval to merge China State Shipbuilding Corp (CSSC, 中國船舶工業集團) with China Shipbuilding Industry Corp (CSIC, 中國船舶重工集團), the people said, asking not to be identified as the information is not public.
The two companies have combined revenue of at least 508 billion yuan (US$81 billion) making products ranging from aircraft carriers for the Chinese navy to vessels to carry containers, oil and gas for commercial companies.
The move could be subject to change as many details need to be ironed out by ministries and regulators, the people said.
Both firms have subsidiaries that trade on the stock exchanges in Shanghai and Hong Kong.
Representatives at State-owned Assets Supervision and Administration Commission of the State Council, CSSC and CSIC did not respond to faxed or e-mailed requests for comments.
The giant resulting from the merger would have more than twice the combined annual revenue of South Korea’s Hyundai Heavy Industries Co, Daewoo Shipbuilding & Marine Engineering Co and Samsung Heavy Industries Co, the world’s three biggest shipbuilders by market value.
CSSC and CSIC were formed in July 1999 under a plan to increase competition and efficiency among the nation’s defense companies.
The two Chinese groups, including their units, had 10.4 million compensated gross tonnes in order backlog at the end of last month, equivalent to about 13 percent of the market.
That compares with 7.72 million tonnes at South Korea’s Hyundai Heavy, according to the latest report by Clarkson PLC.
While the two are engaged in designing and building the Chinese navy’s fleet of aircraft carriers, CSSC also has plans to design and build a cruise ship.
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