China’s two largest state-owned shipping firms, China Ocean Shipping (COSCO) and China Shipping, are reportedly engaged in talks over a possible merger.

Recently, the Chinese Government ordered the two companies to come up with a plan to merge in order to boost the business, South China Morning Post reported.

The move, if finalised, will mark the consolidation of world’s sixth and seventh largest container shipping firms, who control a total of 11 listed entities in Shanghai, Shenzhen, Hong Kong and Singapore.

"The possible integration of COSCO and CSCL has been strengthening market expectation of accelerated SOE reform."

According to Bloomberg News, a recent report by China International Capital analysts stated: "The possible integration of COSCO and CSCL has been strengthening market expectation of accelerated SOE reform.

"As the market expectation has already adjusted and the position of institutions is not high in general, there has been rising expectation for policy reinforcement amid the weak economic climate."

Meanwhile, South China Morning Post reported that the merger process is expected to be complex due to the web of stock listings and distinctive earnings records.

The government would also propose the amalgamation of some of their businesses, if the full merger is not possible.

As part of the country’s effort to restructure state-owned enterprises (SOEs), China CNR and CSR Corporation, China’s state-owned rail firms, merged to form a $26bn company in January 2015.