CHINA will further overhaul its State-owned enterprises (SOEs) and push for mergers in sectors such as power and coal, which are plagued by zombie firms, bankruptcy and debt defaults, according to the head of the agency that oversees State assets valued at US$26 trillion.

“Some of the central State-owned enterprises in certain industries are too fragmented and have low efficiency,” said Xiao Yaqing, chairman of the State-Owned Assets Supervision and Administration Commission (SASAC), referring to SOEs directly regulated by the Central Government.

“We support companies that are willing to come together on their own,” he said in an interview Wednesday on the sidelines of the Boao Forum in Hainan.

As of last year, China’s SOEs had a combined 160.5 trillion yuan (US$25.6 trillion) in total assets, and their total revenue could rival the size of Japan’s economy.

Improving their profitability is critical to the government’s economic policy of re-balancing the economy away from an over-reliance on debt-fueled infrastructure investment and exports to one powered more by services and consumer spending.

The SASAC encourages consolidation in power, coal, and machinery manufacturing to avoid “duplication,” Xiao said.

Since 2014, the SASAC and other ministries have orchestrated more than a dozen mergers in various sectors that involved more than US$1 trillion in assets. The makeover has created behemoths such as China Railway Rolling Stock Corp., the world’s largest trainmaker, and China National Energy Investment Group, the world’s largest thermal power generator.

Xiao said some of the mergers have already yielded desirable results, citing China COSCO Shipping Corp., the combination of two state shipping lines, and China Baowu Steel Group, the fusion of the nation’s two leading smelters, as examples he’s most proud of. (SD-Agencies)