China's cabinet had already approved the merger plan, which will make China High-Tech a subsidiary of Sinomach, the State Asset Supervision and Administration Commission (SASAC) said in a notice. Sinomach makes construction and agriculture equipment, while China High-Tech is a textile machinery manufacturer.

The merger comes as Beijing looks to streamline the number of state-owned enterprises (SOEs) and to create globally competitive conglomerates in sectors including power generation, railways, shipping and chemicals.

The latest move reduces the number of enterprises under the direct administration of the central government to 101, down from 117 since 2012. The number of SOEs could eventually fall to about 40, state media has reported.

Sinomac's listed subsidiaries rose on the news of the merger, with Sinomach Automobile Co Ltd (>> Sinomach Automobile Co Ltd) up over 5 percent and Luoyang Bearing Science & Technology Co Ltd (>> Luoyang Bearing Science & Technology Co.) up over 4 percent.

China Camc Engineering Co Ltd (>> China CAMC Engineering Co., Ltd.), First Tractor Co Ltd (>> First Tractor Co Ltd), Sinomach General Machinery Science & Technology Co Ltd (>> Sinomach General Machinry Sci&Tech CoLtd), Linhai Co Ltd (>> Linhai Co., Ltd.) and Lanpec Technologies Ltd (>> Lanpec Technologies Co Ltd) were all up around 2 percent.

(Reporting by David Stanway and Adam Jourdan; Editing by Richard Pullin & Shri Navaratnam)