State firms' merger raises hopes IT woes will be solved

The merger of two central State-owned enterprises in the communications and information technology sectors will create a behemoth with annual revenue topping $50 billion and help concentrate resources, tackle key problems and solve the supply shortage of China's high-end industrial chain, experts said on Thursday.

Their comments came after Potevio, a telecoms equipment maker, was integrated into China Electronics Technology Group Corp, a major player in the internet and information technology industry, as a wholly owned subsidiary with the approval of the State Council, China's Cabinet.

Some industry insiders coined a phrase to describe the expected nature of the massive post-merger entity: "IT aircraft carrier", a mammoth of sorts that will have multiple capabilities, huge resources and corporate heft.

Potevio will no longer be directly supervised and run by the State-owned Assets Supervision and Administration Commission, the latter announced on Wednesday on its WeChat account.

Xiang Ligang, director-general of the Information Consumption Alliance, a telecom industry association, said Potevio, as a maker of equipment for 5G gear, servers, storage devices, automated teller machines and plenty more, will prove a good fit for CETC.

The merged entity covers a wide range of businesses in the IT industry, Xiang said, adding the move will strengthen CETC advantages in scale, innovation and market, making its strategic role more prominent.

The move also signifies sustained reform of State-owned enterprises in China. The nation has been stepping up its efforts to achieve key technological breakthroughs and boost indigenous innovation.

Jiang Xiaojuan, head of the School of Public Policy and Management at Tsinghua University, said improving fundamental industrial capabilities and removing technological bottlenecks are crucial to achieving high-quality growth.

Jiang said it is important for China to balance self-sufficiency in key technologies with international cooperation, as it builds a modern industrial system.

Data from the website of CETC showed that the enterprise owns 11 listed firms with a total market value of 666.19 billion yuan ($102.85 billion) as of Wednesday.

On Thursday, share prices of all 11 companies went up. For instance, Hangzhou Hikvision Digital Technology Co rose nearly 6 percent on the Shenzhen Stock Exchange.

As of Wednesday, Potevio owned four listed firms－and their shares also rose on Thursday.

AVIC Securities said in a research note that the move will help CETC take advantage of national policies and industrial orientation to have State-owned enterprises cooperate with each other, so they could make breakthroughs in basic materials and key core technologies in promoting China's capability to solve longstanding problems.

The merged entity is expected to further stimulate the potential of related industries and be conducive to the creation of tech giants, support the development of China's digital economy and help cultivate strategic emerging industries, AVIC Securities said.