Mergers within any industry are almost always big news, but they attract even more attention when they occur between two of the most competitive players in the field. According to some, that’s exactly what’s about to happen between some of transportation’s most well known names. COSCO and China Shipping – two of the largest shipping companies in China and the sixth and seventh largest in the world – have recently hinted at a possible merger, inciting plenty of speculation regarding what this partnership could mean.
Will They or Won’t They?
Although representatives from both groups declined to make an official statement, other sources haven’t been quite so tight-lipped about the arrangement. One source (who asked to remain anonymous) admitted that, “the matter is being discussed,” while the Chinese business magazine Caixin reported that the central government had issued instructions for the two companies to start drafting an agreement. Given the political structure in China and the strength of the central government, a decree such as this “straight from the top” usually means concrete action will follow – and soon.
And in fact, the two state-owned companies both stopped trading shares on August 10th, citing “major issues” in the works that were causing them to halt future transactions. An unnamed COSCO executive has even put a timeline to the agreement, stating that the two powerhouses have three months to reach outline a contract. Rumor has it the new organization will include five managing officers – three from China Shipping and two from COSCO – while the chairman from China Shipping, Xu Lirong, will maintain his position.
Restructuring for Power
The Chinese government has plenty of motivation to make such a move, as well. Beijing recently unveiled a plan to restructure many of its state-owned enterprises in an attempt to improve efficiency, reduce “bloat” within larger corporations, and ultimately increase the country’s competitiveness overseas. 2015 has already seen the merger of other top organizations in China, including two train makers and two of the nation’s largest nuclear power firms.
Until COSCO and China Shipping release their own statements confirming the news, all the above reports are officially “speculative.” However, China’s well-known approach to managing its businesses and recent track record of reorganization tip the scales strongly in favor of the impending merger. If and when this does occur, it will mean that a new shipping company emerges with the resources and clout to make a serious splash in waterborne transportation – and China may get exactly the global strength it seeks.