(Xinhua)
Updated: 2008-01-05 17:32

China's state assets watchdog on Friday issued an indirect denial of reports it had pressured shareholders of China Eastern Airlines into approving an investment by Singapore Airlines (SIA).

Related readings:  China Eastern waits for shareholders on Singapore Air deal  China Eastern to sell unit, focus on core business  Singapore Airlines, Temasek buy 24% stake in China Eastern  Cathay backs off stake bid for China Eastern

The Financial Times reported earlier in the week that the government was trying to persuade shareholders to agree to China Eastern's 24 percent stake sale to SIA and Lentor Investments, a unit of Temasek Holdings after Air China expressed reservations over the proposed deal.

In a vague, two-sentence statement which made no mention of China Eastern, the State-owned Assets Supervision and Administration Commission (SASAC) said, "Chinese central-government-owned companies conduct business independently and in line with market principles."

"We support the State-owned giants having overseas strategic investors."

The planned sale is shrouded in uncertainty after China National Aviation Corporation (Group) (CNAC), a major CEA shareholder, said on Thursday it would make a counter-offer if shareholders reject the deal at a meeting to be held in Shanghai next Tuesday.

CNAC, which holds 12.07 percent of China Eastern's H shares, is a wholly-owned subsidiary of China National Aviation Holding Company (CNAHC), parent of flag carrier Air China.

The Hong Kong-based company said Wednesday that the offer price of HK$3.8 does not reflect the fair value of China Eastern and the deal is unfair to other shareholders and domestic airlines as it includes anti-dilution rights and a non-competition clause.

CNAC went further to say that the deal is a potential hurdle to the future development of the nation's civil aviation industry.

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