CNR, CSR both suspend share trading

Reports speculate that two train manufacturing rivals will merge

China's two major high-speed train manufacturers suspended share trading on Monday, reviving speculation that the two companies may merge to avoid adverse competition in overseas markets.

China CNR Corp and China CSR Corp both said on Monday that the share trading suspension was due to an important issue that is still being planned, according to their respective announcements released on the websites of the Shanghai and Hong Kong stock exchanges.

The two companies said they will make a decision on the issue as soon as possible and will release the result and resume share trading in five working days.

China National Railway Locomotive & Rolling Stock Industry Corp (LORIC) in 2000 was split into two locomotive companies which then became CNR and CSR.

Since then CNR and CSR have mainly focused respectively on the northern China and southern China markets.

However, media reports said in September that the State Assets Supervision and Administration Commission (SASAC) was trying to merge the two in an attempt to boost the exports of China's high-speed railway technology.

Financial news portal caixin.com said on September 3 that the move has been confirmed by multiple sources, including companies and SASAC.

However, CNR and CSR claimed on the next day that it had not received any government documents concerning the merger, nor had it submitted any plans to SASAC.

This has not stopped media outlets from speculating about a merger since neither company directly denied future merger plans and the two companies suspended share trading at the same time.

Some analysts see this as a positive development.

There is no need to have two companies that both have similar technology and products and yet lack core technology, Zhao Jian, a professor at Beijing Jiaotong University and a railway expert, told the Global Times Monday.

The two companies have been engaged in intense competition in domestic and overseas markets, he said, noting the rolling stock market is limited so one leading company is enough for a country, such as Siemens is for Germany.

The LORIC was split to meet market orientation trends and encourage competition, but the two companies are too similar to stimulate positive competition, leading to a price war, which has damaged the national interest, Tian Yun, a scholar with the China Society of Macroeconomics, a government think tank, told the Global Times Monday.

In recent years, the Chinese government has made great efforts to promote its high-speed railway technology in global market.

Premier Li Keqiang, who has been nicknamed by Chinese media as "China's top high-speed railway salesman," promoted CNR's high-speed train during his visit to Moscow on October 14.

CNR announced on Thursday that it had won the bidding to provide subway trains to the US city of Boston, becoming the first Chinese rolling stock firm to enter the US market.

Unlike private companies which solely pursue profits, State-owned companies represent national interests, so they should be united or at least have a shared strategy when moving into global markets, Tian noted.

CSR and CNR are administrative institutions that both feature a vast cluster of locomotive manufacturing plants, research institutes and support units, Zhao said, noting the subsidiaries are key to any possible merger or alliance.

As of Monday's share trading suspension, the market value of CSR and CNR on the Shanghai stock market are about 80 billion yuan ($13 billion) and 79 billion yuan respectively.

CNR, CSR and SASAC could not be reached for comment by press time.