Two railway giants announce merger

CNR Corp displays their products at Modern Railways Exhibition in Beijing on Oct 28, 2014.[Photo/CFP]

China's two railway vehicle manufacturers, CNR Corp and CSR Corp, announced on Tuesday that they will merge into one conglomerate.

The merger comes after two months of government review and preparation, officially ending an era in which the companies often cut into each other's profit in the global market.

Wang Mengshu, an academic at the Chinese Academy of Engineering and an ardent supporter of the move, said the domestic market for high-speed trains is quite saturated, so the merger will prevent unhealthy price competition in the world market.

"The new group will have a clear edge over global rivals by being able to optimize the two rail product manufacturers' technological edges, human capital and production capacity," said Wang.

CSR will issue shares to CNR's shareholders to complete the merger. Trading in shares is set to resume on Wednesday, according to a number of announcements released on the websites of CSR, and the Shanghai and Hong Kong stock exchanges.

Over the last three years, CNR and CSR often found themselves competing against each other for overseas orders, including a contract to build a high-speed rail line connecting Turkey's two largest cities (won by CSR) and the largest export contract of mainline passenger trains to Argentina (won by CNR).

Though the Chinese train makers were rarely underbid by competitors from Germany, France, Canada and Japan, they often had to battle each other with lower prices to win international contracts.