Shanghai, September 1

China is urging listed companies to merge and restructure, according to an official statement, as the government seeks to avert a stock rout and encourage investors to return to the market.

China will strongly encourage mergers and acquisitions involving listed firms to help push reform of state companies and inject vitality into the economy, said a joint statement released by four government agencies late Monday.

The notice also stressed measures to boost the stock market, including encouraging firms to pay cash dividends to optimise investor returns and encourage investors to hold stock for the long-term, and urging companies to buy back their own stock — which should see prices rise.

The latest directive comes amid a stock market crash which has seen the benchmark index plummet nearly 40 per cent since peaking in mid-June, prompting a series of interventions by Beijing. Global markets have also swung wildly on fears about slowing growth in China, the world’s second-largest economy.

China last year announced a combination of its top two train makers, state-owned China CNR Corp and CSR Corp, into a single huge conglomerate — sending their shares soaring.

Market speculation about possible mergers between state giants has since focussed on energy, shipping and telecommunications.

China will simplify mergers and acquisition approvals, expand ways for companies to fund deals, and push banks to finance cross-border mergers, the government agencies’ statement said.

State media reported in April that the official Assets Supervision and Administration Commission was considering merging scores of biggest enterprises to create around 40 national champions from the existing 111.