Rail & Infrastructure

Mind the gap

China’s top two train-makers in underground war

Mind the gap

They’re fast, but can provincial governments afford them?

For conspiracy theorists there is a tendency to think of China’s large state-owned firms as chess pieces, guided by ingenious planners in Beijing intent on global domination. While there may be a grain of truth in this, the reality is often a lot messier.

A good example is the ongoing tussle between two state firms for market share in the country’s fast developing subway train sector. Far from signs of a monolithic, centrally planned strategy at work, the pair are slugging it out with a competitive zeal akin to that of Google and Microsoft in the online search business. The Chinese firms may look like corporate siblings, but their rivalry is in fact intense.

The two companies are CNR and CSR, and between them they make around 95% of China’s trains, according to Xinhua. When they were originally created their names pointed to an important geographical difference. China South Locomotive and Rolling Stock Corp (now CSR) operated south of the Yangtze River, while CNR operated north of it.

But as the Economy and Nation Weekly points out, such territorial agreements are a thing of the past. Indeed, in a recent ‘invasion’ of CSR’s homebase, CNR last month inked a deal with Shanghai Electric to make subway trains in the nation’s financial capital.

Under the agreement, CNR is paying Rmb450 million for a 50% stake in Shanghai Rail Traffic Equipment Development. The remainder will be owned by Shanghai Electric and France’s Alstom (remember them? Alstom’s CEO called on international customers not to buy Chinese-made trains last year).

The acquisition, notes Economy and Nation Weekly, will see CNR “extending its ‘warfront’ to CSR’s door”. This is all the more significant because the Yangtze River Delta – with Shanghai at its core – had long been at the heart of CSR’s sphere of influence. Its factory in Pu Town, Nanjing has built trains for the region since 1908. Sinolink Securities reckons CSR accounts for 74% of all train sales within Shanghai.

The main reason for the breaching of the erstwhile ‘Yangtze pact’ is simple enough: China’s cities are scrambling to build subway lines to ease traffic congestion on their roads. Beijing and Shanghai led the way – partly justifying their spend as an adjunct to hosting the Olympics and the Expo respectively.

The results have been astonishing: Shanghai had no subway track at all in 1995, but this year overtook London as the world’s largest metro by line length. And according to the Seattle Transit Blog the city will likewise add the equivalent of New York’s entire subway system by 2020 as it grows even bigger.

The country’s two major metropolises may have been the trailblazers, but subway construction is now underway in 22 cities. By 2016 they are expected to have laid a combined 2,500km of track at a cost of Rmb900 billion ($135 billion). Both CNR and CSR are fighting to win the majority of that train spend – which means geographical niceties are firmly off the agenda.

CNR’s incursion into Shanghai is the latest round in the ongoing battle. CSR has entrenched itself in CNR’s home territory too. In April it began construction of a factory in the northern municipality of Tianjin, and has won the order to provide trains for Tianjin Metro Line 3.

CSR’s deputy general manager Shao Renqiang has said that “the field of urban rail transit is our new market opportunity”. And as Economy and Nation Weekly concludes “that implicitly means CNR-CSR’s ‘war’ will become more intense.”

And for China’s city governments, a bit of healthy competition is probably no bad thing…

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