Beijing's new proposals to relax restrictions on foreign investment in rail transit equipment are unlikely to have much effect on an industry already suffering from excess domestic capacity and dominated by local players, industry insiders say.
The State Council, China's cabinet, said on Tuesday that it will revise the current ânegative listâ and relax restrictions on foreign investment in manufacturing, services and mining. The latest negative list, issued in 2015, specifies that foreign rail transport manufacturers must partner with Chinese companies if they want to operate in the country.
But this restriction was removed from an amended draft list, published in December last year, signaling that foreign train makers such as Siemens AG, Bombardier Inc. and Alstom SA could in the future set up their own plants and independently bid for projects.
These foreign giants have had to cooperate with domestic rivals for expansion, with tie-ups between France's Alstom and Shanghai Rail Transportation Equipment Development Co. Ltd. in 1999, and Bombardier from Canada and New United Group Co., Ltd. based in Jiangsu province, in 2003.
But industry insiders worry that the measures might have come too late to attract further foreign investment to an industry largely monopolized by state-owned players that are already experiencing overcapacity and trying to export the technology.
China's largest train maker, CRRC Corp. Ltd., which has recently scored deals to supply subway trains to the city of Boston in the U.S. and to the Czech Republic, has the capacity to produce nearly 6,000 subway rail cars each year, but the annual domestic demand is only 4,000.
Faced with excess capacity in the domestic market, CRRC has no plans to establish new plants in China, and foreign companies are unlikely to want to do so either, the source said.
Although the market is large, Chinese firms frequently undercut foreign rivals unable to compete with state-owned enterprises (SOEs), which are under less pressure to make a profit due to government support, and domestic firms profiting from an incomplete intellectual property system that allows giants to buy technology from smaller firms at low prices.
Added to this, the National Development and Reform Commission, China's top economic planner, requires that an overall average of 70% of rail projects should be supplied by SOEs.
It is unknown if the NDRC will review the rule after the negative list is updated.
Space left for foreign train makers is already limited, as 70% of automated people movers, a type of driverless electric train often used in airports, are supplied by SOEs, as is 90% of subway line equipment.
Beijing's new proposals to relax restrictions on foreign investment in rail transit equipment are unlikely to have much effect on an industry already suffering from excess domestic capacity and dominated by local players, industry insiders say.
