August 12, 2015 / 7:03 AM / 2 years ago

Trading in units of China aerospace firm AVIC suspended amid merger talk

BEIJING, Aug 12 (Reuters) - Trading in three subsidiaries of the Aviation Industry Corporate of China (AVIC) was halted on Wednesday amid local media reports that said the state-owned aerospace and defense company was preparing to merge them.

The shares of AVIC Aircraft Co, AVIC Capital and AVIC Electromechanical System were suspended indefinitely, the companies said in separate stock exchange filings.

The filings gave no reason for the suspension, and officials at all the companies and AVIC were not immediately available to comment.

Local media, however, said AVIC would "consolidate" the firms as part of the government's efforts to upgrade its fledgling aviation industry so that it is able to compete on a global scale with the likes of Boeing Cp and Airbus Group.

The government is encouraging state-owned firms to merge in a bid to create innovative, globally competitive firms able to export Chinese know-how and high-end manufacturing to the world. So far this year, the state oversaw the merger of the two biggest nuclear power firms and top two train makers.

Analysts, however, said AVIC needed more than a consolidation of its units. "There need to be follow-up steps to streamline AVIC group's business and improve its efficiency," said Wang Xiaohua, senior consultant with Ken Ridge Consulting Co.

China's aviation market is dominated by foreign firms. State-owned aircraft maker Comac is building China's first commercial jet, the C919, with the aim of rivalling the Airbus' A320 and Boeing' B737, but the launch of the aircraft has been repeatedly delayed.

Reporting by Fang Yan and Matthew Miller in BEIJING; Editing by Miral Fahmy

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