Private firms pursue State assets
(MAI TIAN, China Daily staff)
07/09/2003
The electrical-equipment industry is on the verge of a massive consolidation with private companies penetrating the high-end product sector by acquiring State-owned assets. Meanwhile, State-owned electrical equipment companies are seeking to divest some non-core assets, which provides opportunities for the expansion of private firms. In the latest move, Shanghai Electric Corp (SEC), one of the three largest companies in the industry, put assets worth US$100 million for sale in March. The assets cover the operation area of SEC's eight subsidiary industrial departments, including power equipment, petrochemical and engineering machinery. A company spokesman said 40-50 per cent of the assets on offer have been sold till now, most to private firms. Analysts said private firms are seeking to branch out from the low-voltage equipment market which has almost been saturated. The total market value of low-voltage electrical equipment is estimated at 20 billion yuan (US$2.4 billion), according to an official with Delixi Group - one of the largest domestic low-voltage electrical equipment makers. With more companies - most of them private - moving in, the profit margin is shrinking, the official said; experts said most of the small firms are expected to be edged out in five years. Wu Cunzhong, Party secretary of Liushi Town in East China's Zhejiang Province, said one-third of the 20 largest township companies are mulling over acquiring assets of State firms. The town is home to 60 per cent of the low-voltage electrical equipment companies in China. Wu said with the increase of electricity consumption, demand is growing for middle- and high-voltage electrical equipment; and transformer and transmission equipment, which private firms can tap into. Zheng Yuanbao, president of People Electrical Appliance Group, said for companies targeting low-end products, there are two ways out: either expand overseas or acquire State firms to expand product ranges. Zheng's company acquired and merged 34 firms in Shanghai last year, including some State-owned companies. But the mergers and acquisitions of State-owned firms are not easy to accomplish. Private companies lack money to invest in some large equipment such as power generators, experts said. (HK Edition 07/09/2003 page7)
|
