Most industries are far more fragmented in China than in developed countries. Each city or province may feature a full portfolio of breweries, pharmaceutical makers and real estate developers – a vestige of central planning and China’s lack of nationwide sales and distribution networks.

Since reforms began in 1978, however, Chinese industries have begun folding in on themselves. Market leaders are gaining capital and swallowing up smaller competitors, making China a land of milk and honey for mergers and acquisitions (M&A). According to research firm Zero2IPO, companies completed 1,157 M&A deals in China in 2011, up from only 622 in the previous year.

But this number could have been much higher. “M&A is not active enough in China,” said Gary Liu, deputy director of the China-Europe International Business School’s Lujiazui Institute of International Finance. “For many industries, actually there are many potential opportunities for integration, but it doesn’t…