China is said to be merging two shipbuilders into a leviathan that dwarfs South Korean shipyards

China’s government is working on a plan to combine its two biggest shipbuilders to create an industrial giant that would dwarf its South Korean rivals, according to people with knowledge of the matter.

The State Council, China’s cabinet, has given its preliminary approval to merge China State Shipbuilding Corp. (CSSC) with China Shipbuilding Industry Corp. (CSIC), the people said, asking not to be identified as the information isn’t public.

The two companies have combined revenue of at least 508 billion yuan (US$81 billion) making products ranging from aircraft carriers for China’s navy to vessels to carry containers, oil and gas for commercial companies.

The move could be subject to change as many details need to be ironed out by ministries and regulators, the people said. Both companies have subsidiaries that trade on the stock exchanges in Shanghai and Hong Kong.

Representatives at State-owned Assets Supervision and Administration Commission of the State Council, CSSC and CSIC didn’t respond to faxed or emailed requests for comments.

The giant resulting from the merger will have more than twice the combined annual revenue of South Korea’s Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries, the world’s three biggest shipbuilders by market value.