Chinese rail merger adds pressure on western rivals

With an increase in comparatively low offerings, the merger of China's two largest train makers may add pressure on western rivals, Bloomberg reported Tuesday.

The new convergence company increases the pressures on Germany's Simens AG and France's Alstom SA, the two big engineering companies in Europe. The two are facing constrained public spending in their home markets, the report said.

The government has ordered the merger of China Northern Locomotive and Rolling Stock Industry Group Corporation (CNR) and CSR Corporation Limited (CSR), according to a Chinese official involved in the transaction. China is competing for rail projects in overseas market, and focusing on emerging markets, such as Africa, Eastern Europe, Latin America and Southeast Asia.

China's CNR MA, a joint venture of China Changchun Railway Vehicles Co and CNR, won a $567 million contract to supply 284 rail cars for Boston's subway system on Oct 24. The project was the company's first in North America.

Merger of the two listed companies would have annual sales of $33.6 billion and a net income of $1.44 billion. CNR and CSR had a combined market value of $26 billion in Hong Kong trading and employed 172,647 workers at the end of 2013.