The merger of CSR Corp and China CNR Corp, China's two largest train producers, into CRRC Corp has triggered a bout of euphoria on China's stock market.
Why are Chinese investors so enthralled with CRRC?
As of March 2015, there were 112 centrally administrated State-owned enterprises (SOEs) directly managed by the State-owned Assets Supervision and Administration Commission. Over the next three years, many of these enterprises will be restructured, bringing down the number of centrally administered SOEs to about 50.
More importantly, the restructuring will give rise to enterprises that are stronger and more competitive. CRRC, for example, will be much more powerful than CSR or CNR in terms of product competitiveness and corporation influence.
Therefore, we can see that CRRC is just the start.
Over the next two or three years, State assets worth of tens of trillions of yuan will be redistributed.
So, how should the government make use of this round of reforms?
Pay attention to SOEs whose main businesses overlap, or a number of listed companies under one actual controller.
They might become pioneers in the coming restructuring wave.
The author is Liu Ke, a commentator.
