Chinese rail industry to see more orders

BEIJING - Booming demand for urban rail transit from an increasing number of Chinese cities would reignite the railway equipment industry, the China Securities Journal reported Friday.

The National Development and Reform Commission (NDRC) on Thursday revealed an urban transit plan for Kunming, capital of Southwest China's Yunnan province, that features a total investment of 63.49 billion yuan ($10.34 billion).

The NDRC, China's top economic planner, has approved urban transit construction plans for several cities, including Guiyang and Chongqing, for 2013.

Official statistics indicate that total urban transit investment has reached 1.23 trillion yuan thus far, of which 189.6 billion yuan was used to build 337 km of subway lines in 2012. Another 220 billion yuan will be used to build 290 km of subway lines in 2013.

The increased input has accelerated the expansion of the rail equipment industry.

China CSR and China CNR, China's two biggest train manufacturers, have boosted their business with the help of the increased investment. China CSR is filling orders for urban transit vehicles in the cities of Shenzhen, Shanghai and Chengdu, while China CNR has signed agreements concerning train manufacturing or cooperation in public transit with several cities.

The increasing development of intercity railways will also benefit the rail equipment industry. The Pearl River Delta, one of China's most developed areas, will spend 118 billion yuan on intercity railways from 2012 to 2020. China CSR and China CNR have produced new trains that specifically cater to intercity railway networks.

The intercity railway market is hoped to boost the slumping profits of the two companies, which have seen their income drop due to the country's suspension of bidding for bullet trains in 2010.

China CSR saw its year-on-year net profits fall in the first quarter of 2013, with income from bullet train sales slumping 50 percent from a year earlier to 3 billion yuan, according to a report from UBS Securities.

China CNR's quarterly report also showed weak performance, as its total sales amounted to 18.15 billion yuan, down 1.35 percent year on year.

However, the gloomy trend is likely to be reversed in 2013 due to the looming resumption of bullet train bidding, the journal reported.

The China Railway Corporation (CRC), newly formed in March 2013 after the breakup of the Ministry of Railways, has finished preparing for restarting the bidding, which is expected to begin in May or June.