A new steel group, whose annual output will be China's largest and the world's second largest, was established Thursday in Shanghai following the merger of two major steelmakers.

China Baowu Steel Group was created by the merger of Shanghai-based Baosteel Group and Wuhan Iron and Steel Corporation in central China's Hubei Province.

The combined steel output of the two groups totals about 60 million tonnes, exceeding that of Hesteel, China's current top producer, and putting it at second place worldwide, after ArcelorMittal, according to the 2015 data from the World Steel Association.

The new group is estimated to have 228,000 employees, general assets worth 730 billion yuan (106 billion U.S. dollars) and an annual revenue of 330 billion yuan.

The merger is an important move to promote China's economic restructuring and improve the competitiveness of Chinese steelmakers in the international market, said Ma Guoqiang, chairman of Baowu.

The State-owned Assets Supervision and Administration Commission approved the merger in September as the country fights to cut steel overcapacity.

China is the world's largest producer and consumer of steel. Annual steel production in China is 1.2 billion tonnes, but the country aims to reduce steel production by 45 million tonnes in 2016.

China has shut down steel plants with a total capacity of over 90 million tonnes over the past five years and plans to reduce output by an additional 100 million to 150 million tonnes by 2020.

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