In February, China Power Investment Corp and State Nuclear Power Technology Corp (SNPTC) announced they were exploring a merger, to create a group which analysts estimate would have total assets of more than $96 billion.

"Consolidation for China must be seen from a global perspective," said Zhu Jianfang, chief economist at CITIC Securities in Beijing. "I believe there would be some more consolidation in various industries."

Beijing is also likely to use mergers to create more champions in the shipbuilding, electronics and construction sectors, industry experts say.

Market speculation

Anticipated state sector reform has triggered speculative demand for shares of listed units of major SOEs that analysts say may face consolidation, as well as for shares of local SOEs likely to benefit from potential restructuring.

Shares in China CNR Corp and CSR Corp both rose by 10 percent - the maximum allowed per trading day - on March 5, hours before the companies announced that their merger had been approved by the State-owned Assets Supervision and Administration Commission (SASAC).

Shares of the listed units of China Power Investment have also soared.

Some industry leaders and analysts, nonetheless, are skeptical that mergers will create stronger, more globally-competitive State enterprises. They noted that the expansion of major SOEs in the past decade was fueled by cheap loans and subsidies, and the growth came at the expense of efficiencies.

Chinese oil and gas industry experts say the sector might undergo some asset restructuring, but they shrugged off an overseas newspaper report last month that China would merge two of the country's largest State-owned oil groups, China National Petroleum Corp and Sinopec Group.

Such a merger would create a monopoly too big to manage and hurt Chinese consumers, they say.

Wu Da, a portfolio manager at Beijing-based Changsheng Fund Management Co, said his company has been actively searching for stocks likely to benefit from the current State sector reform.

"That has become one of our top priorities," he said, adding that many local SOEs, like those in Anhui province and Shanghai, may receive asset injections from their parents or be listed.