As domestic deals go, and despite not having a “transaction” value in the traditional sense, the recently announced merger of Shenhua Group and China Guodian, which have combined assets of over CNY 1,800 billion ($273bn), is a pretty significant deal.

Shenhua Group is China’s largest coal miner and China Guodian is one of China’s largest power generators, and the approval of this deal by the Chinese government illustrates its commitment to a plan to reform the country’s largest state-owned enterprises (SOEs).

In May 2016 Beijing signalled quite clearly that it wanted its SOEs to “become less wasteful” by reducing their levels of both management and operating subsidiaries. Further intent of reform was shown as recently as July this year, when the government indicated that ideally it would want all of its largest SOEs to be limited liability or joint stock companies by the end of this year.

The deal will see Shenua Group change its name to China Energy Investments – absorbing Guodian Group – and in addition to this a new joint venture coal power company will be formed. Having already received approval from China’s Assets Supervision and Administration Committee, shareholder approval should not be an issue, and this may well be the first of a number of significant Chinese domestic deals that pave the way for the reform of China’s SOEs.