The government wants to maintain control in companies engaged in national defense, petrochemicals, power transmission, telecommunications, coal, civil aviation and shipping, said Li Rongrong, director of China's State-owned Assets Supervision and Administration Commission, caretaker of the government's assets.

At a Tuesday press conference in Beijing, Li said that the government will "foster the growth of between 30 and 50 internationally competitive business groups with their own intellectual property rights and brands."

The government may set up a new asset management company to accelerate the pace of readjusting assets among its companies, Li said, without elaborating.

China also wants its largest companies to tap the capital market for funds. The government will allow business groups such as SAIC Motor Co, the Chinese partner of Volkswagen AG and General Motors Corp., to inject assets into publicly traded units, according to Li. Companies will also be encourage to sell shares on the Shanghai and Shenzhen stock exchanges, he said.

"State companies were previously encouraged to list overseas because we wanted them to enhance their management and because the domestic markets did not have the capital to accommodate them," Li said. "With the improvements in the domestic markets, there are more options available to them to raise funds locally."

State companies will also be required to contribute to the government's pension fund, in a move to reduce the burden of public finance, Li said.

Most of China's largest companies are already State owned. Baoshan Iron & Steel Co, the biggest Chinese steelmaker, ranked sixth in the world by production, is owned by the government.

SAIC Motors, one of China's largest carmakers by sales, is owned by the Shanghai government. The maker of GM's Buick and Volkswagen's Santana sedans sold a record 1.05 million cars and trucks last year, 24 percent more than in 2004 and about 18 percent of the total vehicles sold last year.

The country's six largest airline groups, including Air China Ltd, China Southern Airlines Co. and China Eastern Airlines Corp. are government owned. China Southern is run by the government of Guangdong Province where the carrier is based while China Eastern is Shanghai-owned.

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