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Print[Ferro-alloys.com]What blocked the road of mergers and reorganization of Chinese steel industry was probably the dominant position of the government in restructuring. To solver the problem of disordered capacity expansion, attention must be paid to the phenomena that “The state advances and private companies retreat.”
Mergers and reorganization of Chinese steel enterprises started in the late 1990s. After 15 years, overall effect was far from satisfying though there were many cases of m & a. The vision that backward capacity could be eliminated by mergers and reorganization failed and industrial concentration was not elevated much. Giant steel companies were formed in China, but compared with advanced countries of the world, the overall level of innovation, technology and core competitiveness still have very great disparity. It remained that high-end products relied mainly on imports.
In recent years, mergers and reorganization of steel industry slowed as profit of the industry declined and acquisition risk increased. In 2012, cases of m&a in Chinese steel industry reduced sharply and the industrial concentration fell. Output proportion of the ten largest steel companies dropped by 2.5% from 48.4% to 45.9%
Government-led reorganization aimed to complete the task designated by superiors. Neither enterprise will nor market regulation was respected. The government tended to protect state-owned enterprises due to the natural interest relation between them. It was likely to encourage state-owned enterprises to annex private enterprises, which resulted in the problem of “The state advances and private companies retreat.” Sometimes loss-making state-owned enterprises could annex profitable private enterprises under governmental support.
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