(Yicai) Nov. 24 -- China Electronics Technology Group Corporation is set to become the controlling shareholder of China Hualu Group, the state-owned enterprise’s second takeover of another digital technology SOE in two and a half years.

The merger of the companies, both giants in building digital technology infrastructure and network security, was approved by the State-owned Assets Supervision and Administration Commission, which made the announcement on its website yesterday.

The last time that the SASAC injected assets into Beijing-based CETC was in June 2021, when it made telecoms hardware maker Potevio Group its subsidiary.

Integrating the smaller China Hualu into CETC will help complement and enhance its presence in the information technology sector's industry chain while strengthening its core competitiveness, Liu Xingguo, a senior researcher at China Enterprise Confederation, told Yicai.

China has been actively reforming and restructuring its state-owned sector to boost efficiency, competitiveness, and innovation. Merging SOEs is one of the strategies used by the SASAC to achieve these goals.

The SASAC will continue to accelerate the optimization of the layout and structure of state-owned capital through restructuring and mergers, Vice Chairman Weng Jieming said in February. Since 2012, it has reduced the number of SOEs to 98 from 116 through such mergers, he added.

CETC’s takeover of Dalian-based China Hualu is part of the state asset manager’s aim of merging SOEs based on their expertise, Liu added.

Strategic restructuring and integration in a market-oriented manner is an effective way to adjust the structure of SOEs and will be an important part of the new round of SOE reforms, said Li Jin, chief researcher at Chinese Enterprise Research Institute.

Absorbing China Hualu will not only enable CETC to more effectively complete projects in digital economy, digital governance, and digital social infrastructure construction but will also serve as an opportunity to spearhed the deep integration of the national digital economy and the real economy, Li added.

China Hualu mainly develops, produces, markets, and integrates digital audio and video, and electronic information. CETC is a leading force in the military electronics industry, with a dominant position in electronic gear, industrial infrastructure, and network security.

Before the restructuring, CETC had 18 listed firms under its umbrella, with Hangzhou Hikvision Digital Technology and Taiji Computer among the most well-known. China Hualu owns Beijing E-Hualu Info Technology, a digital service provider mainly engaged in digital economy infrastructure construction and data operating services.

Editors: Tang Shihua, Martin Kadiev