Global regulators clear rail merger plan

An assembly line of CNR Corp in Tangshan, Hebei province. The merger of CNR Corp and CSR Corp has gained approval from overseas antitrust regulators in Australia, Germany, Pakistan and Singapore, without any additional items or obligations. (Photo/Xinhua)

China's two largest trainmakers, CSR Corp and CNR Corp, inched one step closer to their impending merger after getting necessary approvals from overseas antitrust authorities, according to company announcements on Wednesday.

The merger has gained approval from antitrust regulators in Australia, Germany, Pakistan and Singapore, without any additional items or obligations, or remedies, CSR said in an announcement.

The company, however, said it still needs to get the green light from the China Securities Regulatory Commission, the Ministry of Commerce and the Hong Kong Exchanges and Clearing Ltd, which runs Hong Kong's stock exchange.

Industry experts said the merger process is slower than expected. Lyu Juan, an analyst with the Guotai Junan Securities Co, said the whole procedure is likely to be completed in the second half of this year.

Huang Yong, a professor at the Beijing-based University of International Business and Economics, said Chinese authorities need to scrutinize the merger's influence according to the Chinese Anti-Monopoly Law.

"Though the merger will create a giant player, China's rail market will still remain open to foreign investors," he said.

Total assets of the two companies exceeded 305.3 billion yuan ($48.8 billion) at the end of 2014, according to the merger report.

The two companies have 19 senior executives and some of them may leave, the Securities Daily reported on Wednesday, while a representative of CNR told China Daily that is not true. All employees of the two companies will be part of the merged entity, according to the announcement.

Analysts said the merger is a key step for realizing the "One Belt, One Road" initiative put forward by Chinese leaders.

Yao Chang, an analyst with Dongguan Securities Co, said infrastructure building including railways and high-speed roads will be a key element to bolster the strategy and the merger of the two major players will have strategic significance.

China has set a growth target of around 7 percent for 2015 and policymakers said investment will continue to play a pivotal role.

The country owns leading technologies of high-speed trains and rich operating experience, making investment in the railway sector an irreplaceable choice, said Yao.

Investors will see opportunities in sectors such as railway equipment, related components, signals and current supply devices, said experts.

Exports of railway equipment hit 26.77 billion yuan in 2014, a year-on-year increase of 22.6 percent, according to the General Administration of Customs.

China is drawing up a guideline to help its equipment makers, particularly railway and nuclear companies, to go overseas and expand exports, the National Development and Reform Commission said last month.

Zhang Jianping, director of the International Economic Cooperation Institute of the National Development and Reform Commission, said China has to restructure its economy and change its development model by increasing outward investment, as part of its opening-up. China should expand its presence in global markets and contribute to the global market by creating more jobs in host countries.

The merged company will be named China Railway Rolling Stock Corp. The merger gained approval from the State-owned Assets Supervision and Administration Commission and shareholders of the two companies on Monday.