China's cabinet has approved the restructuring of the country's two biggest shipping conglomerates, creating the largest oil tanker fleet in the world and the fourth biggest container line.
"With the approval of the State Council, the China Ocean Shipping (Group) Company (COSCO) and the China Shipping (Group) Company (China Shipping) will be restructured," the State-owned Assets Supervision and Administration Commission said in a one-sentence statement.
The move will improve the competitive edge of major Chinese shipping lines by realizing economies of scale, as the global shipping industry faces a long-term downturn, according to a joint reply to Xinhua's questions from the chairmen of the two companies.
Both COSCO and China Shipping have struggled to be competitive, with overlapping investment, high costs, similar operations and industrial chains, said the reply from COSCO chief Ma Zehua and China Shipping's Xu Lirong.
COSCO has an annual freight volume of over 400 million tons, with more than 700 ships whose total deadweight reaches 51 million tons. China Shipping has more than 530 ships with 36 million tons of deadweight.
Four listed firms under the two groups will have their assets reshuffled to focus on different areas, and the realignment is expected to start next year, according to statements they made after the announcement.
once the restructuring is complete, China COSCO, a listed arm of COSCO, will become the world's fourth biggest container line, with 8 percent of global container freight capacity, said chiefs of COSCO and China Shipping.
China Shipping Development of China Shipping will primarily engage in shipping oil and liquefied natural gas. It will have the world's largest oil tanker fleet by capacity.
China Shipping Container Lines will be transformed into a provider of financial and other services related to shipping, while COSCO Pacific will focus on terminal operations.
Tens of thousands of employees will be involved in the reshuffle, but there will not be any redundancies.
The merger will be China's most complicated restructuring deal ever, involving four listed firms and over 70 asset transactions, said an insider at the China International Capital Corporation Ltd., the company that provides financial counseling for the deal.
Since Dec 1, SASAC has announced three restructurings of centrally-administered SOEs. Earlier this week, China Minmetals Corporation, a leading mining group, will take over China metallurgical Group Corporation.
SASAC deputy head Zhang Xiwu promised more such moves at a press briefing on Friday.
China's top two high-speed rail makers and its two leading nuclear power companies have already merged.
