The State Council has officially approved a plan proposed by the country's State-owned assets regulator to set up an asset management firm to push ahead with restructuring of State-owned enterprises (SOEs), sources with knowledge of the matter told China Daily on Monday.

The new firm Guoxin Asset Management Co Ltd, entirely owned by the State-owned Asset Supervision and Administration Commission of the State Council (SASAC), will focus on consolidating State-owned enterprises and helping SASAC turn small and unprofitable SOEs into profitable companies.

Nicknamed the second China Investment Corporation (CIC), the new entity will be a domestically oriented sovereign wealth fund set up by SASAC to better manage State-owned assets in the industrial sector, similar to the role of CIC that manages part of the country's foreign exchange reserve in the financial sector.

The new company is said to have registered capital of 20 billion yuan and initial funding will be from the State-owned assets management budget and dividends paid by the central SOEs to SASAC last year, according to the source.

It is expected to help SASAC achieve its goal of reducing the number of central SOEs to between 80 and 100 by the end of this year. But details including the company's asset size and how many SOEs will initially be packaged into the new entity are still unknown.

Once established, the new company will be the third asset management company under the domain of SASAC, which set up China Chengtong Group and State Development and Investment Corp in 2005 to take over loss-making SOEs.

Shao Ning, vice-chairman of SASAC, is reported to be chairman of the new company.

SASAC submitted the draft proposal to set up an asset management company to the State Council in March 2009 and sources close to SASAC said it was a painstaking process for SASAC to finally receive the green light from the central government.

Experts said the establishment of the new firm will help SASAC accelerate the process of reform and restructuring of SOEs and provides a platform for SASAC to package a dozen small- and medium-sized SOEs into the new company.

"SASAC is responsible for the value preservation and appreciation of the State-owned assets so it is reasonable for it to set up an asset management firm to deal with it," said Li Shuguang, an expert on State assets at the China University of Political Science and Law.

The number of China's central SOEs dropped to 128 after the China National Packaging Corporation won approval to be merged into China Chengtong Group in February.

An estimated 28 central enterprises will be restructured or consolidated into larger companies by the end of this year.

China's SOEs reaped 74.3 billion yuan in profit in January, 14.5 percent down from December 2009, according to SASAC.

The regulator has also recently ordered State-run companies to shed their hotel assets worth up to 100 billion yuan and focus on their core businesses.