"The transaction has set a good example for other Chinese SOEs that are typically headquartered on the mainland and own a company listed in Hong Kong," said Lo. "The back door listing can help them achieve internationalization and bring the best assets to Hong Kong investors."

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If completed, Citic Pacific will become the largest listed conglomerate in China.

The deal will also expose SOEs to more uncertainties after listing in an international capital market, Lo added.

"International investors, including institutional investors and investment funds, can have more participation in SOEs and the company itself will expect to issue more derivatives."

The deal came right after China advocated more private investment in State business. On March 24, the State Council issued a new notice encouraging SOEs to bring in private capital via stock issuance and cooperation.

Michael Every, head of Financial Markets Research Asia-Pacific at Rabobank, a Dutch multinational banking and financial services company, said that SOEs can re-contracture their debts by raising more foreign capital.

"The timing is very interesting because debt issues are emerging on the Chinese mainland with increasing nonperforming loans made by major banks," said Every.

Every said it is part of the reform process in China and also a defense measure for Chinese companies.

The proposed transaction is awaiting approval from shareholders. Citic Pacific's shares closed at HK$14.30 on Thursday, up by 12.95 percent.

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