China to launch agency to reform state firms-sources

HONG KONG, April 22 (Reuters) - Beijing is close to launching an agency to restructure and consolidate Chinese state-owned enterprises that need government help to improve their business and balance sheets, two sources with direct knowledge of the plan said on Wednesday.

The State-owned Assets Supervision and Administration Commission (SASAC), China's powerful watchdog in charge of all major state-owned enterprises, is working with the finance ministry to finalise the plan, the sources told Reuters.

A draft proposal to establish the new firm, which is expected to have at least 50 billion yuan ($7.3 billion) of initial registered capital and to be directly led by SASAC, was recently submitted to the State Council, China's cabinet, for approval, said the sources.

The idea to set up the new agency to restructure and consolidate state-owned enterprises emerged in Chinese newspapers earlier this year and soon gained attention from foreign dealmakers who have been frustrated in efforts to buy Chinese state firms.

The new firm, dubbed by Chinese media "CIC 2.0" in reference to the country's $200 billion sovereign wealth fund, China Investment Corp (CIC), will not invest abroad but focus purely on domestic industry consolidation, said the sources, who declined to be identified due to the sensitive nature of the matter.

In the future, the new firm led by SASAC will act as a manager of certain state companies after restructuring work while SASAC itself will focus on regulatory and supervision matters, the sources said.

A SASAC official declined to comment, while the finance ministry spokesman could not be immediately reached for comment.

($1=6.83 yuan)

(Reporting by George Chen, Editing by Jacqueline Wong)