A view of the stand of CSSC during an expo in Dalian, Northeast China's Liaoning Province in October 2018 Photo: IC

China Shipbuilding Industry Corp (CSIC) and China State Shipbuilding Corp (CSSC) announced a long-anticipated merger plan that analysts said will spur the shipbuilding industry and related military sectors.

CSIC and CSSC are formulating a restructuring plan for their relevant administrative departments, according to announcements issued by eight listed firms under the two state-owned ship makers late Monday.

CSSC Holdings' stock went up 7.87 percent on Tuesday's closing, and China Shipbuilding Industry Co rose 7.49 percent.

The military related sector and shipbuilding sector outperformed the overall China stock market on Tuesday by climbing 3.86 percent.

The benchmark Shanghai Composite Index went down 0.03 percent at Tuesday's closing.

The merger, which is still awaiting regulatory approval, will promote the upgrading of the shipbuilding sector and give a further push to related military industries, according to analysts.

"A successful merger between the two shipbuilding giants, which have produced a majority of China's naval vessels, will benefit the development of the country's naval forces," a Beijing-based veteran observer surnamed Liu in the military field told the Global Times on Tuesday.

The comprehensive combat performance of Chinese submarines, surface ships, underwater weapons and other equipment has been greatly improved in recent years, according to an article published on the WeChat account of CSIC on Monday. 

During the past 20 years, CSIC has pushed the weapons and equipment of the Chinese navy and realized a cross-generation leap, said CSIC Chairman Hu Wenming.

CSIC and CSSC were divided into two companies 20 years ago. CSIC was designated the "northern ship" and CSSC became the "southern ship" due to their geographical locations. 

The two companies also witnessed the rapid development of China's civil shipbuilding industry, and the struggles after the industry was affected by the 2008 global financial crisis.

The merger, coming 20 years later, is in accordance with China's policy guideline of building stronger enterprises to improve market competiveness, according to analysts.

Feng Liguo, a research fellow at China Minsheng Bank's research center, told the Global Times on Tuesday that the planned merger is further implementation of China's mixed-ownership enterprise reform to build larger and stronger enterprises.

"Only through internal reform aimed at improving the vitality of enterprises can the competitiveness of companies be strengthened," Feng said.

This merger, if it goes ahead, would not be the first combination of resources among state-owned enterprises (SOEs). In December 2014, the two largest state-owned train manufacturers in China - CSR Corp and China CNR Corp - also announced their merger.

The shipbuilders' merger will not simply mean operating as one company. It will require internal integration and cooperation to achieve optimal governance, Zhou Liwei, a veteran analyst in the shipbuilding industry, told the Global Times on Tuesday.

SOE mergers in other industries have been proved effective, Zhou added.


Newspaper headline: Long-awaited merger set for state shipbuilders