I work in rail safety. Two major non-Chinese train companies attempted to merge a few years ago, explicitly to build a company that could compete with China's national company, and provide safer alternatives to state-sponsored cyberhacking of Western rail. It fell down to an anti-monopoly decision by a single person in the EU ministry, who killed the proposal. Several attempts were made to streamline the merger, but…
If the problem is that Chinese companies are shipping train firmware with backdoors, then you need to ban those companies. Problem is, given the Newag situation[0], I don't think they can actually do this at the level of individual procurements. So they need specific EU directives banning this behavior and explicitly adding a process by which procurement can ban suppliers for prior noncompliance. What facilitating an illegal merger will do is reduce the EU's bargaining power with industry, ensuring that we get more backdoored trains and more risk.
[0] Short version: they got caught shipping firmware that bricks the train if you take it to a third-party repair shop, even though the contract specifically mandated Newag provide repair manuals. EU agencies and member states do not have the power to disqualify Newag from future tenders for failing to adhere to prior ones, so they keep winning contracts