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China is forging the country's answer to General Electric, combining two state-owned railroad equipment makers to create the world's second-largest industrial company. And the giant isn't planning to stay at home.
The merger of CSR Corp. and China CNR Corp. is now complete, producing a $US117.3 billion behemoth called CRRC Corp. with economies of scale that will allow China to compete even more aggressively for overseas rail deals. Shares of CRRC will begin trading Monday under CSR's old tickers in Hong Kong and Shanghai.
China is using its state-owned rail firms not just to win lucrative contracts but to project political influence abroad. CRRC will dwarf competitors like Germany's Siemens AG and France's Alstom SA as it targets emerging markets in Africa, Latin America and Southeast Asia -- often with sales pitches from Premier Li Keqiang -- while bidding for high-profile contracts in the developed world.
"It used to be that CSR and CNR were competing against Bombardier and Alstom; now it has become China versus everybody else," said Alexious Lee, head of industrials research for CLSA Ltd. in Hong Kong. "China's products may not boast high-end specifications, but they provide value for money."
CRRC comes on the scene at a time of upheaval in the global rail industry. Canada's Bombardier Inc. is pondering the future of its rail business -- CSR and CNR were said to have considered taking a controlling stake -- and Italy's Finmeccanica SpA unloaded its rail-signaling business to Japan's Hitachi Ltd. in February.
Close to home, China's rail push puts it in direct competition with Japan for contracts and clout in Southeast Asia. Further abroad, both countries are eyeing a proposed high- speed rail project in California.
European and North American competitors also will face stiffer competition as the new Chinese behemoth pursues overseas deals. Chinese companies already were known for their aggressive tactics: Last year CNR won China's first major rail contract in North America -- a $US567 million deal for Boston subway trains -- with a proposal nearly 50 percent cheaper than Montreal-based Bombardier's bid.
Siemens, Alstom and Bombardier "were big guys, and suddenly there's a big, big guy," Canadian Economy Minister Jacques Daoust said last month, when CSR and CNR were said to be weighing their bid for Bombardier's rail unit. "It's a concern."
This article first appeared on www.afr.com
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