"The Chinese government guidelines for SOE restructuring imply a significant increase in asset injections from parents to their listed companies in the coming years, and it could become an important source of earnings potential," said Ma Jun, chief economist at Deutsche Bank Greater China, in its Themes and Strategy for 2007.

There were 196 SOEs under central government control in 2004. Now there is 159, and SASAC has vowed to reduce the figure to between 80 and 100 by 2010.

Li Rongrong, minister of the SASAC, said in January that the restructuring of SOEs, especially those directly owned by the central government, will enter a critical stage this year. He urged firms to carry out further strategic restructuring and improve corporate governance to sharpen their competitive edge.

Meanwhile, China's successful securities reform to convert State-owned non-tradable shares to tradable ones since April 2005 has provided a solid foundation for SOEs to go public.

"After the accomplishments of the securities reform, the interests of major shareholders, top managers and small shareholders are all connected together, and this triggered the major shareholders' motives to increase their company's competitiveness and, most of the time, the leading position in respective industries by listing," said Zhu Yucheng, an analyst with the Deding Investment Consultancy Company.

Investor speculation has sparked dramatic price movement on rumored asset injection activities by some public companies. On February 9, as many as seven companies such as Qingdao Aucma Co Ltd and Shenzhen Heungkong Holding Co Ltd publicly denied such plans.

Though asset injection provides good opportunities for investors to buy, analysts warned that they should focus on firms with clear asset injection plans and avoid blind speculation. 

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