Siemens has dropped a bid to supply trains and equipment for the $7bn Mecca-to-Medina high-speed railway line project in Saudi Arabia, opting to join a Chinese consortium bidding for the work.

In a sign of the growing global competitiveness of Chinese rail manufacturers, Siemens abandoned its own bid as part of a consortium with the Saudi Binladin Group.

Instead, it has joined a bid led by state-owned China South Locomotive & Rolling Stock Corporation for the second phase of the Haramain high-speed rail project, according to people familiar with the situation.

Siemens will provide signalling and electrification equipment to the Chinese consortium, which also includes China Railway Construction Corp and the Beijing Railway Administration.

The 450km railway will link Islam's two holiest sites via the port of Jeddah and will ease congestion during the annual Hajj pilgrimage, when more than 2.5m people make the journey to Mecca.

The Chinese bid is seen as the frontrunner – China Railway Construction Corp, which is also state-owned, was part of a consortium that won a $1.8bn contract to build the first phase of the project last year.

“Siemens realised when China threw its hat in the ring, that they were unlikely to win so they decided to join them rather than let one of their competitors team up with the Chinese bidder,” said one person involved in the project.

France's Alstom and South Korea's Hyundai and Samsung are also bidding for the second phase of Haramain, according to a person close to the situation. Siemens said it was unable to comment on the project because of the ongoing tender.

Final bids for the project are due in on May 1.