CFHI, Harbin Electric deny 'marriage' report

China First Heavy Industries Co and Harbin Electric Corp have rubbished media reports of a possible merger between the two State-owned firms.

Shanghai-based China Business Weekly, quoting people close to the matter on Tuesday, said that CFHI and Harbin Electric were close to a possible marriage. Moreover, a work report of the government of Qiqihar, a city in Heilongjiang province where CFHI is based, published in a local newspaper said that "the government will fully support the merger of CFHI and Harbin Electric Corp and the reform of State-owned enterprises".

Harbin Electric is headquartered in Harbin, the capital Heilongjiang province.

Following the reports, CFHI had sought suspension in the trading of its shares on Wednesday. On Thursday, its shares rose by 2.76 percent to 7.07 yuan ($1.07).

Both companies released statements clarifying that they have never received any notice from their supervising governmental organs about a possible merger.

CFHI and Harbin Electric are among the 53 key State-owned enterprises directly controlled by the central authorities, when it comes to concerning national security and the lifelines of the national economy.

CFHI is China's largest nuclear forging manufacturer by annual output. It accounts for about 90 percent of the domestic nuclear forgings and 80 percent of the pressure vessels for nuclear reactors. Its products are also used in metallurgy, transportation, mines and petrochemical engineering.

Harbin Electric is one of the few companies in the world that is able to independently build the core equipment for nuclear power plants. Its products are widely used in coal-fired, hydro, nuclear and wind power plants.

If the restructuring is successful, the newly formed company will become one of the three leading companies in equipment manufacturing in China, said Du Pu, an analyst with Shenwan Hongyuan Securities Co.

The other two are Chengdu-based Dongfang Electric Corp and Shanghai Electric Group Co Ltd.

According to Du, a CFHI and Harbin Electric merger would create a strong power generation equipment research and development base and provide new growth momentum.

"The two companies have complimentary advantages in equipment manufacturing for nuclear and conventional islands. Once merged, they could undertake whole nuclear equipment projects. They may form new growth points and increase the new company's competence in nuclear island equipment building in the international market," said Du.

"2016 will see restructuring of a lot of State-owned enterprises, in line with China's current efforts in streamlining resources in search of a more efficient growth model," Du said.

Major State-owned enterprise restructuring in 2015 included CSR Corp and CNR Corp merging to become CRRC Corp in March 2015.

China Power Investment Corp and State Nuclear Power Technology Corp merged to become State Power Investment Corp in May 2015.

yangziman@chinadaily.com.cn