Joint venture: Zhuzhou Siwei Railway Products Co. Ltd.

The U.S. party: ABC Rail Products Corporation

ABC Rail Products Corporation was established in 1987 and is based in Chicago, Illinois. The company deals with the engineering, manufacturing, and marketing of products for the rail industry. Since 1992, the company has grown strongly thanks to a series of affiliations and joint ventures worldwide. Before the Zhuzhou Siwei Railway Products joint venture, ABC Rail Products established another Sino-American joint venture in China in 1996. This venture is mainly involved in cast steel wheels and other cast steel products for rail vehicles. It has a registered capital of $34M and is registered as Datong CRRC Amsted Castings. At the time of establishment, the Chinese partner was the Ministry of Railroads; at present, CRRC Datong Electric Locomotives is the Chinese party holding 60% of the joint venture.

CRRC Yangtze Co. Ltd. 

CRRC Yangtze is a Wuhan-based company with a registered capital of USD 204mn. It is engaged in R&D, manufacturing, and servicing of railway freight cars as well as maintenance of urban rail vehicles, sale and export of railway car components and mechanical and electronic products. It also has first-class R&D centers, manufacturing bases, and export bases in the railway freight car industry. The company has several subsidiaries, including in Australia and Sierra Leone.

Before 2015, CRRC Yangtze was named CSR Yangtze Rolling Stock, a large backbone enterprise under China South Locomotive and Rolling Stock (CSR). When CSR merged with China North Locomotive and Rolling Stock Corporation (CNR), it led to the formation of CRRC in 2015, and the Chinese shareholder in the joint venture became CRRC Yangtze. CRRC Yangtze Co. is under full control of CRRC Yangtze Group, a subsidiary of CRRC Corporation. CRRC corporation is 15% controlled by the Hong Kong company HKSCC, but the majority is held by China Northern Locomotive & Rolling Stock Industry with 50%. The ultimate controlling party is the State-owned Assets Supervision and Administration Commission of the State Council (SASAC). This can potentially imply that there is a risk of Chinese State influence within the venture.

With a registered capital of USD 4.1bn, CRRC is a major conglomerate in the railway sector and the largest rolling stock manufacturer in the world. As the central enterprise under the Ministry of Railways, it is heavily subsidised by the Chinese government, receiving more than 5 million RMB in government subsidies each year. CRRC also runs several National Key R&D laboratories, such as laboratories on traction and control for vehicles, new power semiconductor devices, and high-speed train system integration. According to Datenna’s research, CRRC Corporation has invested in a total of 44 subsidiaries. Those investments, along with partnerships, expand to every node of the supply chain, from material to energy sources, from semiconductors to energy storage.

Zhuzhou Siwei Railway and its shareholders all operate in the railway sector, a key industry in the Made in China 2025 strategy (MIC 2025). The JV partner CRRC is known to be one of the leading SOEs in advancing the advanced railway transportation industry, a core sector in MIC 2025. CRRC was born from the merger of CSR and CNR in 2015, the same year as the MIC 2025 plan was published. The merger of the two largest railway companies represented a turning point for the Chinese railway sector as CRRC became a monopoly for domestic locomotives, buses, tracks, and urban rail, reaching more than half of the global rail transit market.

CRRC serves the goal of creating a transportation system that operates globally and to bring the fourth industrial revolution to the railway sector, designing intelligent high-speed vehicles based on AI, IoT, and smart technologies, positioning itself as a global controller of the new railway era. Therefore, CRRC is not only a key player in the MIC 2025 but also for China Standards 2035. Under this strategy, CRRC strives to position itself as a global railway standard maker.

To achieve these goals, a global network is necessary, and Zhuzhou Siwei Railway Products is just one example of CRRC’s efforts to expand its global presence and influence. The company counts 46 wholly-owned subsidiaries and, just as CRRC Yangtze, other CRRC-affiliated companies have entered the U.S. market since 2015. CRRC MA Corporation established a rail car manufacturing headquarters in Massachusetts for the construction of Boston subway cars; CRRC Corporation set up CRRC Sifang America as an Illinois-based subsidiary that is supplying railcars to the Chicago Transit Authority (CTA); CRRC was also awarded a contract to build cars for the Los Angeles County Metropolitan Transportation Autohority (LACMTA).

The U.S. is not the only target market for CRRC: the company is present in Argentina, Brazil, Turkey, South Africa, New Zealand, and Australia. CRRC also entered the European market through the acquisition of Beneq, a European company dealing with semiconductors and through the establishment of different subsidiaries, such as CRRC ZELC Europe.

Being the biggest railway company in China and indirectly linked to the Chinese government, CRRC’s global presence might represent a risk for technology transfer that might be used to serve the purposes of Made in China 2025. These links can also lead to CRRC becoming one of the global key players in the railway sector.