Foreign rail companies are now facing a hard time, as China gradually shifts favor to local corporations.
According to Ansgar Brockmeyer, board chairman of German company Knorr-Bremse in the Asia-Pacific region, they have been struggling in the last two years to secure contracts to supply parts for the trains due to the government favoring Chinese companies more. Knorr-Bremse has been a supplier of brakes for metro rail systems in the country for around 25 years now.
Brockmeyer further said that even foreign-invested Chinese firms are being disregarded, as contracts are instead awarded to wholly Chinese-owned companies, Reuters reported.
He also revealed that the new bidding rules implemented by Chinese awarding committees, as stipulated in the tender documents provided to their company in 2015, have significantly scored down foreign-invested companies against local ones. The new rules, Brockmeyer said, ended up causing the company to lose on 3 of the 11 bids they made.
Lu Aachen echoed the same sentiments, noting, with more government-supported local enterprises coming forth, they are now experiencing growing pressure to effectively do their business. Lu chairs a joint venture between state-owned Shanghai Electric Group and French electronics company Thales SA to supply signaling systems for Chinese subways.
He said that there were originally only four to five suppliers in the business, but the number has since grown to nine due to the entry of local competitors. Three more new local providers are expected to be approved soon.
In the last decade, foreign companies already had very limited penetration in the lucrative Chinese rail market, with them only being able to do business as sub-suppliers for domestic companies, or as minority stakeholders in joint ventures.
Business groups like the European Chamber of Commerce in China have also called attention to the matter, saying that the "increasingly hostile" business environment might end up pushing foreign companies to seek business elsewhere.
Meanwhile, as local Chinese rail companies are slowly gaining dominance in the domestic market, they are also gradually penetrating the global scene.
Chinese railroad companies China Railway Construction Corp. Ltd.. (CRCC) and China Railway Corp. (CRC) have reportedly won the contract to operate and maintain a light railway that will connect the Ethiopian capital of Addis Ababa to Djibouti's capital Djibouti City, Caixin reported.
The project is the first time Chinese companies have managed to win bids for all stages of development for an overseas project. Construction of the 750-kilometer railroad was awarded to CRCC's subsidiary China Civil Engineering Construction Corp and CRC's Railway Erju Co. Ltd., which completed it in 2015.
China is also looking to invest in the development of a high-speed railway to connect the Indonesian capital of Jakarta to nearby cities as part of its overseas expansion.