The biggest economic theme in China over the next six to 12 months is likely to be "a surge in domestic mergers and acquisitions", says David Millhouse for Bloomberg View. With the authorities already curbing "irrational" overseas acquisitions by Chinese firms, the next step is likely to be consolidation of state-owned enterprises (SOEs), especially in key sectors such as coal, power, heavy equipment manufacturing and steel. The mega-deals are already underway: China Cosco Shipping offered $6.3bn for Orient Overseas International in July, for example.
Getting these reforms right is vital, says The Economist. In the 1980s, when China was opening up to the world, "the state sector dominated its economy a big factor behind China's remarkable growth since then has been the relative decline of SOEs... they account for less than a fifth of output today". Yet these mega-mergers are likely to concentrate "even more power in the hands of a few". The risk is that these new giants will "crowd out private investors, hogging capital and allocating it poorly".
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