A hostile takeover of one of China's largest non-state steel groups by a state-owned competitor could be finalised as early as next week in a deal that has heightened concerns about creeping renationalisation.

State-owned Shandong Iron and Steel Group, the world's ninth-largest steelmaker by capacity, is likely to take a two-thirds stake in privately held Rizhao Iron and Steel, according to two people familiar with the matter and Chinese media reports.

Du Shuanghua, Rizhao's majority owner and China's second-richest man last year according to the Hurun Report rich list, has fought a bitter battle to avoid losing his company to Shandong Steel, a newly formed group controlled by the provincial government of Shandong, in the country's east.