China consolidates high-speed train companies

China’s two state-owned fast-train construction companies announced a merger at the dawn of 2015, as the government seeks more deals abroad.

China’s state-owned assets  regulator, the Assets Supervision and Administration Commission (SASAC), has approved the merger of the country’s two biggest high-speed train manufacturers, China North Locomotive and Rolling Stock Industry (Group) Corporation (CNR) and China South Locomotive & Rolling Stock Corporation Limited (CSR), as part of the government’s efforts to boost its high-speed rail industry overseas.

The deal’s approval, which will see CSR’s name on the new entity, follows Chinese press reports in April last year of reticence from both companies’ managements and opposition from the China Railway Corp (CRC), the state operator of the railroad network.

“The merger doesn’t depend on the wishes of CNR and CSR. It will mainly be decided by SASAC and CRC. It is the state’s will,” a source close to CNR was reported to have said then.

CNR and its southern competitor were created in 2000 and 2002 respectively and listed on the Hong Kong and Shanghai Stock Exchanges in 2008.

CNR and CSR suspended trading of their shares on October 27. Company statements on October 31 and December 1 announced that the suspensions would continue. Trading has not resumed on either bourse.

Both companies announced that the new entity would carry the CSR name at the end of December.

The railway network operator, currently accounting for three-quarters of both companies’ sales, has criticised the government’s move to merge the two companies, claiming it will undo recent achievements after a decade of coexistence both at home and overseas.

Founded on December 28, 2007 and headquartered in Beijing, with a registered capital of 11.84 billion yuan, CSR was listed on Shanghai and Hong Kong in August 2008 and has established 17 wholly-owned and shareholding subsidiaries in 10 provinces and cities, and has nearly 90,000 employees.

In line with the country’s announced ambition to recreate a modern-day Asian Silk Road, Li Keqiang, the current Premier of the State Council of the People's Republic of China, embarked on a promotional tour for Chinese railway equipment and network construction in neighboring countries last year and has signed several substantial contracts with governments to build rail in Myanmar, Laos, Thailand, Nepal and India.