BEIJING, March 9 (Xinhua) -- Lin Donglu, board chairman of the Baotou Iron & Steel Group in north China, said Friday that the corporation is in talks with the Shanghai Baosteel Group Corp., China's largest steel producer, to be integrated into the latter.

    The consolidation of steel businesses in China is key to the profit prospect of steel plants with annual production capacity of less than ten million tons, said Lin, also a deputy to the National People's Congress (NPC), the parliament, at the ongoing NPC annual session.

    Baosteel is seeking acquisition targets nationwide. It acquired69.61 percent of the stocks of Xinjiang Bayi Iron & Steel in January, Lin said, taking the acquisition as a wise move.

    "The restructuring is in line with the government policy of encouraging consolidation in the steel sector and a win-win strategy for all since we can share technology, capital and sales network," he said.

    Liang Tiecheng, director of the Regional Reform and Development Commission in north China's Inner Mongolia Autonomous Region where Baotou is located, said Baosteel had proposed to purchase a controlling stake of Baotou Iron & Steel Group. But the request has not been decided.

    Baotou Iron & Steel produced 7.48 million tons of crude steel last year, compared with 22.5 million tons from Baosteel.

    Liang, an NPC deputy, said the potential cooperation with Baosteel is a major step to boost Baotou's steel production capacity to 15 million tons from the current ten million tons.

    The Baotou Iron & Steel is faced with growth bottlenecks as the profit margin from traditional steel products has become very thin, Liang added.

    China plans to establish two to three steel conglomerates with an annual production of over 30 million tons each by 2010 through consolidation, according to the National Development and Reform Commission.

    It also expects the nation's top ten domestic steel companies will control more than half of the country's total steel output by then.