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China considers merger of Cosco and China Shipping

China considers merger of Cosco and China Shipping
The merger speculation of two of China’s state-owned shipping conglomerates, Cosco Group and China Shipping Group (CSG), could soon become a reality as part of China’s plans to restructure its state-owned enterprises, reports said.

Several arms of the two shipping giants have halted trading in their shares pending an announcement, and merger speculation has again arisen as Beijing tries to reform its government-backed enterprises, including those in the energy and telecom sectors.

All or part of the operations of Cosco and CSG may be combined, according to Bloomberg citing people familiar with the matter.

“China's shipping sector has been the poster boy for over-investment and overcapacity," Bloomberg Intelligence Chief Asia Economist Tom Orlik told Bloomberg News. “Any restructuring which addresses that problem would be a step in the right direction.”

DNB Markets observed that if a merger between Cosco and CSG happened, it would create a liner controlling 8% of global transportation capacity which compares to Maersk of 15.3% using Alphaliner numbers from June this year.

“On a standalone basis, consolidation is positive, but would not have a material impact,” DNB Markets commented.