Railway giants' stocks surge on merger announcement

CSR Corp displays their products at Modern Railways Exhibition in Beijing on Oct 28, 2014.[Photo/CFP]

"As the Chinese economy has entered a 'new normal', the central government is eager to create bigger international brands from its high-end industries such as rail products and communications to maintain quality growth," said Zhang Ji, director-general of the department of foreign trade at the Ministry of Commerce.

"New normal" refers to economic conditions in China that differ from the former high-growth period. The trade volume of China's rail products, telecommunication and power equipment grew 10 percent year-on-year between January and November, according to the latest customs data.

Feng Hao, a rail transportation researcher at the National Development and Reform Commission, said China is also hoping to upgrade the strength of its industrial chain through this merger.

"The amalgamation can be a practical way to aid the further development of China's electronic, electrical, mechanical and materials industries," said Feng.

However, Feng said a lot of work still lies ahead on various aspects of this deal, such as sorting out duplication of construction operations and other overcapacity, as well as avoiding monopolistic activities.