France’s Alstom and Germany’s Siemens have agreed to merge in a deal that brings the former arch-rivals together to create a new European champion to counter competition from China.

If the transaction goes ahead the combined company will have 15 billion euros ($18 billion) in sales of trains, track-signalling systems and rail services, enabling it to better compete with international rivals, especially China’s state-backed CRRC.

It would also signal a shift in France’s policy of industrial intervention under President Emmanuel Macron in favour of creating “European champions” — even if that means selling industrial assets that were once deemed strategic.

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