The merger of the Baoshan Iron and Steel Group and its smaller rival Wuhan Iron and Steel was formally completed in Shanghai on Thursday. The deal creates China's largest steelmaker.

The new Baowu Steel Group will have an annual production capacity of around 60 million tons. That makes it the world's second-biggest steelmaker, behind ArcelorMittal.

Baowu Steel has total assets worth 730 billion yuan, OR 106 billion US Dollars, and a workforce of 228,000 people.

The merger was formally approved by the State Council in September as part of China's ongoing efforts to streamline its sprawling state sector.

"China Baowu will pursue revenues in the high-end market. We will produce smart and green products with good services. This is in line with China's "made in China 2025" strategy, and the plan of cutting overcapacity in the steel sector. We want to increase our global influence." said Ma Guoqiang, chairman of China Baowu Steel Group.

The government aims to put 60 percent of China's steel capacity in the hands of the country's 10 biggest firms by 2025. The government has been encouraging acquisitions and mergers in the industry for years.

China is also seeking to cut the number of companies run directly by the central government as part of far-reaching reforms of state-owned enterprises.

The number of state-owned enterprises now stands at 102, down from 111 at the beginning of the year. Chinese state media has reported that number could eventually fall to 40.