A DEAL for China’s largest cement maker to take over a major rival collapsed after failing to gain government approval, the company said Friday, in a blow to the government’s pledges to tackle oversupply.

    Anhui Conch Cement offered nearly US$600 million for a controlling stake in struggling West China Cement late last year, but China’s commerce authorities failed to approve it by the June 30 deadline, scuttling the deal, Anhui Conch said.

    Rumors the deal was in danger saw West China Cement shares plunge 33 percent in Hong Kong on Tuesday before they were suspended from trading.

    The companies said in a joint statement to the Hong Kong stock exchange that they would “continue to explore future opportunities for business collaboration in different structures or manners.”

    China’s government has repeatedly pledged to tackle overcapacity, which is rife in its inefficient, largely State-owned heavy industry.

    But most major industrial firms have strong government backers, making efforts to shutter or merge them particularly challenging in the face of vested interests.

    China’s cement industry boomed during the country’s three decades of massive investment in highways, airports, apartment buildings, and office blocks, bloating to more than 3,300 firms.

    China has said it wants to reorient the economy away from relying on such debt-fuelled spending to boost growth and towards a consumer-driven model, but the transition has proven challenging.

    Analysts said its easier access to financing as a State-owned enterprise would have boosted highly-indebted West China Cement’s ability to borrow after it posted losses of 309 million yuan (US$46 million) last year.

    (SD-Agencies)