SHANGHAI/HONG KONG, April 20 (Reuters) - Orient

Securities announced that it will acquire unlisted

rival Shanghai Securities, in a deal that local media said would

make it one of China's 10 biggest brokerages.

The deal comes as China's central government, eager to build

globally competitive investment banks and asset managers,

encourages consolidation in the country's $1.7 trillion

brokerage industry.

Orient Securities said on Sunday that it would use cash and

newly issued shares to acquire 100% of Shanghai Securities but

did not give a value for the deal.

Both Shanghai-based firms are controlled by companies that

manage state assets for the Shanghai government.

Total assets of the combined entity are expected to exceed

600 billion yuan ($88 billion), making Orient Securities a top

10 brokerage in China, Shanghai Securities News reported.

Orient Securities' Hong Kong shares jumped as much

as 13.5% before paring most of those gains to be up just 0.8% in

morning trade.

Beijing has dialled up rhetoric about the need for reform in

the brokerage sector, with new directives to encourage mergers

and acquisitions as well as restructuring in an industry in

which more than 140 Chinese and foreign players compete.

Shanghai-based brokerage Guotai Junan acquired Haitong

Securities last year, creating Guotai Haitong,

China's largest brokerage by assets at the time before it was

later outranked by Citic Securities.

($1 = 6.8197 Chinese yuan)