China announced this morning plans to merge its two largest state-controlled railcar makers, China CNR Corp and CSR Corp. These two major companies sell train and subway cars to China and several developing nations, but they have begun focusing on Western nations. In attempts to win overseas contracts, CNR and CSR have increasingly found themselves competing over the same high-profile contracts. Additionally, they face competition from a Wide array of Western companies including “Canada’s Bombardier Inc, France’s Alstom SA and Germany’s Siemens AG” (Wall Street Journal).
CNR and CSR were previously a single entity, but were split off ten years ago to promote more competition in the Chinese railcar sector. However, Chinese officials have decided the most optimal way for their top state-controlled railcar makers to penetrate Western markets and compete with established Western firms was to merge these 2 companies back together. It appears that Beijing is aiming to shake up its sluggish state-owned enterprises, which economists have said are slowing China’s long-term growth (Wall Street Journal).
In recent years, Beijing has stated their efforts to reduce monopolies in several facets of the market. This merger seems like China is backtracking on these efforts in an attempt to give CNR and CSR a better chance of securing foreign contracts. Currently, both CNR and CSR are competing with other firms for a $68 Billion contract in California. (Financial Times). It will be interesting to observe in recent months if this merger allows them to secure this contract.