The first task

CMI has pledged to attach top priority to the integration of industries long troubled by excess capacity, such as iron and steel, PV power generation, shipbuilding and energy sectors.

At present, China faces the arduous task of industrial transformation, with some sectors mired in overcapacity, especially traditional manufacturing industries.

In August, the Ministry of Industry and Information Technology released a list of companies whose outdated or excess capacity will be eliminated this year, covering 132 companies in 10 industries.

Taking the iron and steel industry for example, it has been in the red for 11 consecutive quarters and the rate of capacity utilization was less than 80 percent during the first half of 2014, according to data from the China Iron and Steel Association. "Now is the most difficult time for the industry since the reform and opening up in China that was launched more than three decades ago," said Li Xinchuang, Executive Deputy Secretary-General of the association.

However, analysts say realizing business integration in the beleaguered sector will be no easy task.

"If CMI wants to succeed in integrating the iron and steel sector, it needs to overcome four obstacles—the strictest environmental protection standards in history, a large amount of capital, a high-end talent pool and intertwined interest between local governments and businesses," said Li.

In addition to the iron and steel industries, PV power generation is another sector targeted by CMI for business integration. CMI aims to become a top clean-energy provider in the country.

The PV industry has been dubbed the "engine of future energy revolution." Although the manufacturing of PV components has developed China in recent years, the growth of its sister industry, PV power generation, in China has been comparatively slow.

Ren Haoning, a senior research fellow from China Investment Consulting Corp., said the PV industry is at a key stage of structural adjustment.

"Although the industry now faces many challenges, things will improve. The implementation of favorable loans and government subsidies will increase the profitability of PV power stations in China, thereby bringing about an overall recovery of upstream and downstream companies," Ren said.

Ren also warned that overcapacity is more severe in the upstream and midstream of the PV industry.

"If CMI makes a foray into the component assembling sector recklessly, the PV business is likely to become more of a burden than an asset to them," Ren warned.

Ever since CMI announced the top priority of the company, to integrate sectors with overcapacity, there have been widespread doubts over the decision. Some question whether CMI can ultimately turn a profit after buying those companies at fire sale prices.

Dong shrugged off those doubts, saying CMI will combine traditional financial concepts and capital operations with business integration, which represents the most profound difference between CMI and other industrial investment funds.

"It's a rich mine," Dong said, referring to his company's planned integrations. "Some people just haven't realized its potential value."

Ambitions of CMI Subsidiaries

CMI New Energy: Integrating and operating China's photovoltaic power generation projects, pushing forward upgrades of the energy sector and becoming a top clean energy supplier

CMI Iron and Steel Association: Creating an association of private iron and steel companies to realize communication, complementation of advantages and sharing of resources between those companies

CMI Mining Logistics: Creating a top logistics group for the sale and distribution of mineral products

CMI Property Development: Developing high-quality projects in core areas of first-tier cities and in new districts of China's second-tier cities

CMI Property Management: Setting up a smart and customized property management service system

CMI Aircraft: Becoming the second largest corporate aircraft management company in the world through mergers and acquisitions

CMI International: Offering all-round investment banking services to private firms as a Hong Kong-based investment bank

CMI Capital: Gathering private capital and carrying out direct long-term strategic equity investment

CMI Capital Europe: Investing $1.5 billion in a European headquarters in London to bring more Chinese private capital to seek investments, mergers and acquisitions in Europe

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