Panda Electronics Group is in merger talks on what could become China's fourth-largest consumer electronics firm, with targeted annual sales of more than 50 billion yuan (about HK$46.8 billion) by 2005.
The move is part of accelerating industry consolidation, driven by looming foreign competition now that China has joined the World Trade Organisation.
H-share Nanjing Panda Electronics, the Hong Kong-listed arm of Panda Electronics, has confirmed that its parent is in talks with eight mainland consumer electronics makers and information technology (IT) firms to form an industry giant.
The merger was initiated by the Jiangsu provincial government, said one of the possible partners in the deal, with the apparent aim of helping small and scattered home-grown firms achieve efficiency and economy of scale.
Core Pacific Yamaichi International head of research Alex Tang said mergers and acquisitions were a necessary step if mainland companies wanted to compete with foreign players.
'Many industries in China have undergone some kind of restructuring over the past decade. But the accession to the WTO [at the end of last year] helped to accelerate the trend of consolidation,' Mr Tang said.
The proposed new entity would have a registered capital of 3.5 billion yuan, and a business scope spanning software development, home appliances and telecommunications equipment manufacturing, according to a Panda Electronics official.