As if not to be outdone by the mega mergers planned for Western chemical companies, the Chinese state is thought to be planning to merge two of its own giants, Sinochem Group and China National Chemical Corp (ChemChina). The deal, should it go ahead, would create China’s third-largest refiner by capacity. The story reported by Western news agencies has not been acknowledged by authorities in Beijing.

The prospective combination of two companies with assets of around $110 billion would create the largest oil refiner behind China Petrochemical Corp (Sinopec) and China National Petroleum Corp (CNPC), according to data from consultants Wood Mackenzie quoted by the news agency Bloomberg. The move signals a new strategy by policy makers to boost competition rather than weaken the dominant state-run companies by spinning off assets, an analyst told the news agency.

A merged company would have an estimated annual output capability of about 50 million tonnes of oil, equivalent to about 1 million barrels a day, and Wood Mackenzie believes this makes it China’s third largest refiner.

Sinochem has about 50,000 employees and assets worth about $39 billion in businesses ranging from oil fields in Brazil to rubber plantations in Southeast Asia, ChemChina is the country’s largest chemical producer with nine refineries and more than 140,000 workers, according to its website. The conglomerate that owns China’s largest fertilizer producer as well as fluorine and seed companies claims to be the Peoples Republic’s largest supplier of agricultural raw materials.

ChemChina has shown an appetite for acquisitions in recent years, and is currently in the process of acquiring Swiss agrochemicals producer Syngenta. Observers said it was unclear what effect a merger of the two Chinese groups would have on this deal. ChemChina is reportedly facing a funding gap of $15 billion for the Swiss purchase. Citing people close to the negotiations and private documents, the Chinese news agency Caixin said the company’s debt ratio is already at 80%, so it was difficult to see how the transaction could take place without guarantees.