The Compagnie Generale Des Eaux (CGE) of France signed a contract Monday with a Chinese water company in this boomtown bordering Hong Kong, to acquire 45 percent of its shares at a cost of US$400 million. 

It was China's largest merger and acquisition this year by a foreign company, and the country's biggest deal in the water supply industry, said Huang Chuanqi, chairman of the board of the Shenzhen Water Supply Group, which sold the shares.

According to the agreement, the French company will directly own five percent of Shenzhen Water Supply's shares, while the other 40 percent will be held by CGE's joint venture with a Beijing-based company, the Beijing Capital VW Investment Co. Ltd.

China has begun to gradually open access to its public facilities to foreign investors, following its entry into the World Trade Organization in 2001, with water supply being one of the investment focuses.

"The introduction of the foreign investor will help the Shenzhen Water Supply Group to expand its business more quickly and provide local people with better services," said Huang Chuanqi.

The Shenzhen Water Supply Group is a state-owned enterprise offering running water and handling sewage treatment for more than two million people in the city.

Sources at the Shenzhen City Office of Economic Restructuring said the reform of the city's four other large state-owned enterprises -- in the fields of energy, gas, foodstuffs and public transportation -- are proceeding smoothly, as they had completed the bidding for the introduction of foreign capital.
 
(Xinhua News Agency December 23)