Joint venture: Zhuzhou Siwei Railway Products Co. Ltd.
At Datenna, our China experts continuously track and conduct detailed investigations into joint ventures that have been established between EU or U.S. companies and Chinese entities, located in China. Through a series of articles in our resource library, we highlight striking EU-China and US-China joint venture case studies, analysed based on Datenna’s in-depth, unique data on China’s techno-economic landscape. This article elaborates on the joint venture Zhuzhou Siwei Railway Products, set up by ABC Rail Products Corporation and CRRC Yangtze.
Short read
- Zhuzhou Siwei Railway Products Co. Ltd. is a Sino-American joint venture established by CRRC Yangtze Co. Ltd. and ABC Railway Products Co. Ltd.
- The joint venture is active in the railway sector, a key industry in China’s Made in China 2025 strategy.
- CRRC has been blacklisted by the U.S. Department of Defence since June 2020.
The joint venture
Zhuzhou Siwei Railway Products Co., Ltd. was established in 2001 as a joint venture between CRRC Yangtze Co. Ltd. and the U.S. partner ABC Rail Products Corporation. Its scope of business includes the design, development, manufacture, assembly, and sale of railway equipment in the domestic and international markets including the U.S., Sweden and Australia. Its main manufacturing products include cast steel bogies, which help support and stabilise the rail vehicle and absorb vibrations and centrifugal forces in high speed curves, making them a key component in high-speed trains. Zhuzhou Siwei Railway Products has its main headquarters in Zhuzhou (Hunan Province), an important railway equipment innovation centre. Within the joint venture, the Chinese party holds the majority share (60%), with the U.S. partner holding 40%.
The U.S. entity: 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 USD 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.
The Chinese entity: CRRC Yangtze Co. Ltd.
CRRC Yangtze Co. Ltd is a Wuhan-based company with a registered capital of USD 204M. 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 4.1B, 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 RMB 5M 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.
Made In China 2025 and China Standards 2035
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 state-owned enterprises 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 Authority (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.
CRRC blacklisted by the US Government
In June 2020, the U.S. Department of Defense added CRRC Corporation to the U.S. Blacklist along with other Chinese military companies operating directly or indirectly under the People’s Republic of China’s (PRC) Military-Civil Fusion (MCF) strategy. In fact, CRRC has joined the MCF Fund in 2017 and has publicly affirmed its readiness to implement the MFC strategy and to expand the application of dual-use technology and products. For this reason, CRRC and all the firms within its arsenal are considered by the U.S. government as blacklisted companies.
However, it seems that despite being blacklisted, CRRC has continued to improve its competitive position. In June 2021 the Rail Security Alliance, a group of railroad suppliers, wrote a letter to the U.S. Secretary of Defense about raising concerns over the presence of CRRC in the United States economic scene, asking for immediate action. However, CRRC seems to manoeuvre around policy barriers by building factories abroad, establishing subsidiaries, establishing joint ventures or using private firms under its arsenal, thus overcoming foreign country legislation and continuing to increase its global presence.