China encourages enterprise mergers, reorganization

%3CP%3E%3CFONT%20face%3DVerdana%3EThe%20State%20Council%20issued%20guidelines%20on%20Monday%20encouraging%20mergers%20and%20the%20reorganization%20of%20businesses%20in%20key%20industries%20as%20China%20transitions%20toward%20a%20more%20open%2C%20market-oriented%20economy%20and%20tries%20to%20reduce%20leverage.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EBusinesses%20are%20encouraged%20to%20enter%20into%20trans-regional%20acquisitions%20and%20reorganization%20so%20that%20the%20country%20can%20create%20a%20smaller%20number%20of%20higher%20quality%20companies.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EState-owned%20enterprises%20are%20encouraged%20to%20draw%20private%20capital%20through%20the%20transfer%20of%20shares%2C%20capital%20increases%20and%20new%20share%20issuances.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThe%20guidelines%20urge%20for%20the%20accelerated%20reforms%20of%20monopoly%20industries%20and%20the%20introduction%20of%20private%20capital%20to%20encourage%20investment%20from%20various%20sources%20and%20diversified%20ownership.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EBusinesses%20struggling%20with%20overcapacity%20are%20highly%20advised%20to%20accelerate%20mergers%20and%20reorganization%20to%20cut%20excess%20capacity.%20Zombie%20enterprises%20are%20encouraged%20to%20phase%20out%20of%20the%20market.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EMergers%20and%20reorganization%20should%20be%20pushed%20in%20industries%20with%20low%20concentration%20ratios%20or%20with%20lots%20of%20homogeneous%20competition%2C%20to%20improve%20profitability.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThe%20government%20pledged%20financial%20support%20for%20mergers%20and%20reorganization.%20Eligible%20enterprises%20are%20allowed%20to%20issue%20preference%20shares%20and%20convertible%20bonds%20to%20raise%20funds%20for%20these%20activities%2C%20according%20to%20the%20guidelines.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3E%3CBR%3E%28China%20Daily%29%3C/FONT%3E%3C/P%3E