Industry mergers and acquisitions, auto steel concentration will increase

Abstract The "Guiding Opinions on Accelerating the Merger and Reorganization of Enterprises in Key Industries," issued by the Ministry of Industry and Information Technology and 12 other ministries, outlines clear targets for industry concentration across several major sectors. For industries such as automotive, steel, cement, electrolytic aluminum, and shipbuilding, the document sets specific goals for the top 10 companies to reach 90%, 60%, 35%, 90%, and 70% market share respectively by 2015. In the pharmaceutical sector, the target is for the top 100 companies to account for over 50% of total sales. Meanwhile, in areas like rare earths, electronic information, and agriculture, no strict concentration targets were set, but instead, scale benchmarks for leading firms were established. The initiative aims to streamline industrial structures, reduce overcapacity, and enhance the competitiveness of key enterprises. Zhu Hongren, director of the Ministry of Industry and Information Technology's office, emphasized that many of these industries suffer from low concentration, fragmented operations, and a lack of strong, leading companies. This has led to issues such as redundant investments, overproduction, and unhealthy competition. For example, China's steel industry includes more than 500 producers, with the top 10 accounting for only 48% of total output, compared to South Korea’s Pohang Steel, which holds around 60% of the domestic market. Similarly, the auto industry is highly fragmented, with over 1,300 vehicle manufacturers, including more than 170 automobile makers, 120 motorcycle producers, and numerous others. Many of these firms are small, inefficient, or even non-operational. To address this, the "Opinions" calls for mergers and acquisitions to boost efficiency, expand supply chains, and promote large-scale operations. It also encourages local governments to remove barriers, create supportive policies, and foster cross-regional collaboration. By doing so, the policy seeks to not only improve industry performance but also provide a model for future reforms in other sectors. This strategic move reflects a broader effort to align China's industrial structure with global standards, ensuring sustainable growth and long-term competitiveness.