Merger expected in Chinese rail sector

Trading in shares of China Railway Group and its partially owned subsidiary, China Railway Erju, have been suspended pending a ‘material asset reorganisation’. This is expected to see the two railway construction contractors merged in an effort to streamline Chinese state-owned enterprises.

China Railway Group is the second largest contractor in the world, behind China State Construction & Engineering (CSCEC) and ahead of its third-placed main rival China Railway Construction Corporation. Last year the company, which is quoted on the Hong Kong Stock Exchange, had revenues of some HK$ 750 billion (US$ 96.8 billion).

Meanwhile, China Railway Erju was placed 35^th in iC’s 2015 ranking of the world’s 200 largest construction companies, with revenues of CNY 70 billion (US$ 11.4 billion). The company is listed on the Shanghai stock exchange.

An announcement is expected before the end of the week on whether a merger of the two will go ahead. Both companies are controlled by China Railway Engineering Corporation.