Wang Xiaoqi, deputy director of the Industry Planning Division of the State Economic and Trade Commission, said alliances in all forms will help domestic steel makers reduce production costs, enhance product development and marketing capabilities, and engage more strongly in the world market.

"It is important for the steel industry over the next five years to launch enterprise groups through alliances between domestic steel makers in different regions and with foreign companies,'' Wang said on Sunday.

His remarks followed a cooperation agreement signed last week by three steel giants - Shanghai-based

Three European steel companies -France's Usinor, Arbed of Luxembourg and Spain's Aceralia - announced in February an all-share merger worth US$4.6 billion to create the world's biggest steel maker.

Wang said the Chinese government was encouraging domestic companies to tie up with foreign firms.

A Baosteel spokesman confirmed earlier this year that the company, which went public in Shanghai last year, intended to form a cross-shareholding agreement with Nippon Steel of Japan and South Korea's Pohang Iron and Steel after its listing on the overseas stock markets.

Currently, Baosteel's marriage with Nippon Steel and Pohang is at the level of technical exchange and market trend analysis.

The three conglomerates now control one-fifth of the Asian steel market.

China Steel Corp, the largest steel maker in Taiwan Province, was reported last week by foreign media sources to be seeking a strategic alliance with five major Japanese steel companies, including Nippon Steel, to counter rising raw material costs.

(China Daily 07/09/2001)