The 2016 Annual Report to Congress: Military and Security Developments Involving the People’s Republic of China reported that "Shipyard expansion and modernization has increased China’s shipbuilding capacity and capability for all types of military projects, including submarines, surface combatants, naval aviation, and sealift assets. China’s two largest state-owned shipbuilders—the China State Shipbuilding Corporation and the China Shipbuilding Industry Corporation—collaborate in shared ship designs and construction information to increase shipbuilding efficiency. China continues to invest in foreign suppliers for some propulsion units, but is becoming increasingly self-sufficient. China is the top ship-producing nation in the world... "
China is the leading shipbuilding country in the world. As of the end October 2010, China's production completion of shipbuilding was 50.90 million deadweight tons (dwt), an increase of 58.4%, and new orders of the industry were 54.62 million dwt or 2.9 times that of the same period last year, respectively. China’s ‘White List’ of shipbuilders, first released in September 2014 as a guide to the yards which the Chinese government wished to support, listed 71 builders which together delivered 90% of Chinese output. The first "white list" included 51 shipyards that it deems worthy of favourable policy support.
In the previous two years, China's shipbuilding industry was severely affected by the 2008 financial crisis. Prior to 2008, when the global trade grew at a premium over the global GDP, the outlook in the shipping sector was encouraging and this pushed the expansion of shipbuilding capacity
China's shipbuilding industry experienced significant slowdown in production completion, cancellation of existing orders, and huge drop in new orders in late 2008 and 2009. In helping the industry overcome its difficulties the State Council passed the "The Plan on the Adjustment and Revitalization of the Shipbuilding Industry" in February 2009 with three critical targets: 1) Stalling the declining demand; 2) Promoting mergers and acquisitions (M&A), and restructuring; and 3) Encouraging indigenous innovation and R&D.
The State-Owned Shipbuilders include two main group: CSSC & CSIC. These two Groups are both large and under supervision of the State Council. There are also other group such as CSC group, AVIC group and etc… The Private Shipbuilders include some big shipbuilders which are listed in the stock exchange such as Yangzijiang Shipbuilding Group, RongSheng Heavy Industry and some others such as New Times, MingDe, HanTong and etc…
China overtakes Korea as the world's top shipbuilder in the first half of 2010 and kept ahead in terms of three major industry indicators, including new orders, order backlogs and delivery. China’s shipbuilding industry is expected to be left with a handful of 30 shipbuilding enterprises with demand for yard facilities not exceeding 60m dwt by end-2015. At its peak, China’s shipbuilding sector witnessed more than 3,000 shipyards at the start of 2010, leading to a severe yard capacity glut and sending thousands of yards out of business as newbuilding orders plunged.
As at end-2015, China’s total shipyard capacity was estimated at 65m dwt, down from around 80m dwt in 2012. But the current capacity is still too excessive, and China’s shipbuilding industry needs to ‘slim down’ further by removing another 30% or more of capacity. The 30% reduction in yard capacity from 65m dwt would translate to around 19.5m dwt. Since 2015, more than 20 large to medium sized Chinese shipbuilders had either declared bankrupt or stopped production altogether.
Wang Qi, director of Shanghai Waigaoqiao Shipbuilding (SWS), subsidiary of state-owned China State Shipbuilding Corp (CSSC), observed that China needed to prevent the emergence of speculative private yards, which he referred to them as “cancer cells" of the industry. “If the market starts to recover and you have this influx of speculative yards, they will throw the demand-supply equation off balance again," Wang was reported saying. Ni Tao, deputy general manager of state-owned Cosco Shipyard Group, concurred that private yards can “open and close as they like", unlike state-owned yards that carry national responsibility and are needed for any nation.
According to figures published in China, its Shipbuilding Industry developed rapidly during the period of the 10th-11th National 5 year Economic Plan (2000-2010). With the average annual growth of 29%, in 2010 Chinese Shipbuilding output reached 40 billion dollars, accounting for 43% of the global shipbuilding market. And takes the position of number one world’s shipbuilder. China’s largest shipbuilding cluster is located in the Yantze River Delta Region. Jiangsu Province is the biggest export province in China, accounting for 27% of the total amount. And Yangzijiang Shipbuilding Group was the biggest shipbuilder in JiangSu Province.
In October 2013 the State Council issued The Guidance on the Resolution of Seriously Excessive Capacity. The reform focused on the five industries with seriously excessive capacity such as the steel, cement, electrolytic aluminum, glass and shipbuildingindustries and the State Council designed the “road map" to resolve the problem of excess production capacity for the next five years. Brokerage researchers believed that with the implementation of the above guidance, the shipbuilding industry would usher into a profound adjustment, and a large number of companies with weak competitiveness and low value-added technology were expected to disappear. Theindustry agglomeration gradually increased. Meanwhile, the shipbuilding industry would develop into the marine engineering with high technology and high added value. Thus,China Shipbuilding Industry and other companies would clearly benefit.
The Guidance proposed to improve marine equipment level of shipbuilding industry, enhance the capacity building of maritime security, fully explore the potential ofdomestic demand for marine equipment in shipping, marine engineering, fisheries, law enforcement , emergency rescue and other areas, and adjust and optimize the product structure of ships. Meanwhile, raise the standards of industry access, conduct thedifferentiated policies on the enterprises with the failure of reaching access standardsand no orders of building new ships for more than one year, support the corporate mergers and acquisitions, and augmented the industrial concentration.
The Implementation Plan (2013-2015) on the Acceleration of Structural Adjustment and the Transformation and Upgrading in Shipbuilding Industry released in August 2013 clearly defined that in the next three years China would accelerate the development of marine engineering equipment and high-tech ships, strengthen the administrative law enforcement and the allotment of civil ships, promote the structural upgrading of ship industrial products. The industries related to shipbuilding were highly associated. Therefore, the resolution of high excessive capacity and the upgrading of industrial competitiveness would assist China to seize the historic opportunity of the shift of world shipbuilding center.
The Guidance also proposed to encourage the transformation of the existing shipbuilding capacity into the field of marine engineering equipment, support the conversion of SMEs, and upgraded the proportion of high-level production capacity. In the context of maritime strategy, maritime industry became the hot spot in a new round of the economic development. According to China Ocean Development Report (2013), Since the 1990s, the average annual GDP growth of the world marine economy was about 11 %, significantly higher than the global economic growth rate during the same period by 3% -4%; currently the marine economies contribute to more than 50% of GDP in the United States, Japan and other developed economies, while the marine economy in China's 2012 GDP was about 5 trillion yuan, accounting for less than 10% of GDP.
In the future, China would greatly enhance the marine ability to expand the field of marine development, and marine economy would become a new growth point. As expected by the industry, according to the requirements of China on marine equipment planning, in 2015, the annual sales income of marine equipment would reach over 200 billion yuan,and offshore oil and gas development equipment accounted for 20% of the equipment international market share.
China had seen rapid development of its marine industry. China has more than 3 million square kilometers of water territory, with more than 1,400 harbors and 210,000 cargo ships. According to the Ministry of Land and Resources of the PRC, the marine industry would gradually become one of the pillars of China's economy. The success of the shipbuilding industry was based on decisions made in the early 1980s to corporatize the shipbuilding sector, to open the industry to foreign technology imports, and to compete on the global market.
The dual-use industrial base was a critical component of China's strategic high-tech economic plans. Currently, its leading dual use sectors include shipbuilding, aviation, space, nuclear, electronics and IT infrastructures. The shipbuilding industry has made particular progress in modernizing its design and manufacturing capabilities and in transfering commercial shipbuilding practices to naval construction. Chinese shipbuilding was domestically and globally competitive, and seems to be profitable - indeed, it was the only sector in the defense industry that was adding productive capacity, i.e., new shipyards and more workers.
As Richard A. Bitzinger, Associate Professor, Asia-Pacific Center for Security Studies, has noted "Following an initial period of basically low-end commercial shipbuilding - such as bulk carriers and container ships - China's shipyards have since the mid-1990s progressed toward more sophisticated ship design and construction work. In particular, moving into commercial shipbuilding began to bear considerable fruit beginning in the late 1990s, as Chinese shipyards modernized and expanded operations, building huge new dry-docks, acquiring heavy-lift cranes and computerized cutting and welding tools, and more than doubling their shipbuilding capacity. At the same time, Chinese shipbuilders entered into a number of technical cooperation agreements and joint ventures with shipbuilding firms in Japan, South Korea, Germany, and other countries, which gave them access to advanced ship designs and manufacturing technologies - in particular, computer-assisted design and manufacturing, modular construction techniques, advanced ship propulsion systems, and numerically controlled processing and testing equipment. As a result, military shipbuilding programs collocated at Chinese shipyards have been able to leverage these considerable infrastructure and software improvements when it comes to design, development, and construction."
Three types of firms make up China's shipbuilding industry: 1) large state owned enterprises [SOEs] with mega-size production and technology capacity; 2) small private shipbuilding enterprises in the coastal provinces; and 3) joint ventures of foreign and domestic companies. Two mega parenting conglomerates dominate China's shipbuilding industry. CSSC (China State Shipbuilding Corporation) which has headquaters in Shanghai, controls about 30 shipyards in the east and the south including those in Anhui, Guangdong, Jiangxi and Shanghai. CSIC (China Shipbuilding Industry Corporation) which is based in Beijing controls about 48 shipyards in the north and the west with a focus on major ports in Liaoning and Tianjin as well as operating 28 science, design and research units.
They are directly under the supervision of the central government. According to Delivered Deadweight figures published in China of 2011, CSSC & CSIC group account for about 42% of the total delivered dead weight. To restructure through M&A, the Plan aims to strengthen the global competitiveness of CSSC and CSIC, promote integration of large enterprises in the value chain and encourage SMEs to go into niche areas. Although the government intends to provide capital fund, financing and credit loans for the restructuring, there has been little progress.
To sustain demand, the government encouraged banks to provide more financial support and credit loans to both domestic and foreign enterprises, and to stimulate the domestic shipbuilding market through more investment on infrastructural ships and high-tech ships such as maritime engineering products. Toe promote indigenous innovation and R&D capability of domestic enterprises, apart from improving existing ship models, China would invest more on high-tech and high value-added technologies such as environment-saving and energy-efficient shipbuilding, maritime equipment projects, and critical internal equipment within ships. China was also developing its offshore drilling rig industry as a future alternative to traditional shipbuilding. Many large enterprises in China are starting their production of rigs for both domestic and foreign orders.
According to the statistics of China Customs, China's total ship import and export values reached US$30.8 billion in 2009, of which ship imports accounted for US$2.4 billion. Trade volume could reach a historic high of approximately US$ 40 billion in 2010. However, oceanic pollution and the industry's structural imbalances, currency appreciation and cost increases continue to present challenges for the development of the marine industry.
Chinese shipbuilding output and ship orders in hand have shown growth for six consecutive years and have been ranked the second in the world. The central government's 11th five-year plan (2005 to 2010) pointed out that the key to strengthening the shipping industry lies in design capability, marine equipment supply, large-scale shipbuilding construction, and optimizing the three main ship types: bulk-carriers, oil tankers, and container vessels. Emphasis would be put on hi-tech ships, new ship designs and ocean engineering equipment, which have additional added value.
Chinese accomplished shipbuilding output and ship orders in hand have enjoyed fast growth for seven consecutive years and are ranked second in the world. According to statistics from the China Shipbuilding Industry Association, China's shipbuilding output was 42.43 million deadweight tons (DWT) in 2009, rising 47% from 2008. According to statistics issued by Clarkson, a UK consultant, Chinese accomplished shipbuilding output was 56.76 million deadweight tonnages from January to November of 2010, with an increase of some 55.4% compared with the same period of 2009. New ship orders were 26 million deadweight tons in 2009, which was down 55% compared with the same period of 2008. The market share of Chinese accomplished shipbuilding output, new ship orders and ship orders in hand accounted for 34.8%, 61.6% and 38.5% respectively of the world's totals in 2009.
Although the China shipbuilding industry has enjoyed remarkable growth, the impact of the international financial crisis has been transferred to the shipbuilding industry in which new building orders continue to decline in number and the currency appreciation and cost increase would impact the profits of the China's shipbuilding companies in long term.
China was one of leading shipbuilding countries in the world. in 2009, Chinese shipbuilders built vessels with a total displacement capacity of 42.4 million dead weight tons (dwt), which was an increase of 47% from that of 2008. Owing to the global financial crisis, China's shipbuilders received orders for a total of 26 million dwt in 2009 compared with 58.2 million dwt in 2008. China would deliver its first super-large crude tanker, which could carry up to 308,000 t of crude oil, to Saudi Arabia in 2010.
In 2008, the shipbuilding sector consumed about 12 Mt of steel products, of which 9.6 Mt was medium-thick plate.in 2008, China produced 20.4 Mt of medium-thick plate forshipbuilding and exported 8.97 Mt. The Republic of Korea, which received 6.31 Mt, was the leading destination for Chinese medium-thick plate; the remainder was shipped to Japan, Malaysia, Singapore, and Vietnam. At year end 2009, the country had medium-thick plate output capacity of 71.3 Mt, of which 27 Mt was for shipbuilding. Domestic analysts estimated that the shipbuilding sector would consume about 15.2 Mt in 2011. During the past several years, the quality of Chinese shipbuilding plate had improved; however, the quality of steel products remained as good as such countries as Japan and the Republic of Korea.
After more than 3 decades of development, the existing structure of most industries no longer met the requirementsof the modern business world. The Chinese enterprises wereconsidered to be weak in independent innovation; they had low measures of competitiveness and productivity, depended heavilyon external demand, and had undiversified product lines. The Government announced that 10 major industries in China - automobile manufacturing, electronic information, equipment manufacturing, iron and steel production, light industry, logistics, nonferrous metals production, petrochemicals, textile manufacturing and shipbuilding - were to be reformed and upgraded. These industries accounted for more than80% of the country's total industrial output value and aboutone-third of the GDP.
In February 2009, China's State Council approved the adjustment and revitalization plans of Chinese shipbuilding industry. According to the plan, the government would encourage financial institutions to expand financing to purchasers of ships and extend fiscal support for domestic buyers of long-range ships until 2012. The plan would also support the industry in stabilizing the production, enlarging the market demand, developing marine engineering equipment, supporting the merger and acquisition and technical innovations.
China allocated significant capital for port and waterway construction to meet significant growth in freight volume. Since 2004, China has stepped up its construction of ports. China's port throughput was increasing at exponential rates, reflecting foreign trade growth. Eight ports in mainland China, namely Shanghai, Shenzhen, Qingdao, Tianjin, Guangzhou, Xiamen, Ningbo and Dalian, are included among the 30 top container harbors in the world. The port of Shanghai was by far the busiest one in the world. The cargo turnover of Shanghai port exceeded 650 million tons and container throughput reached 29 million TEU in 2010. Both of these two indexes have exceeded Singapore as the world's largest port.
To facilitate the global trade, most ports in China are putting emphasis on expanding capacity and upgrading the port facilities as well as the modernization of operations. The products and technologies in high demand are Vessel Traffic Management Information Systems, laser-docking systems, terminal tractors, dredging equipments and security equipment for the ports and vessels to abide to International Ship and Port Security Code (ISPS).
China was building more deep-water berths to handle the larger fifth and sixth generation container vessels. The largest project was the construction of Yangshan deep-water port, approximately 20 miles offshore from Shanghai and linked to the mainland by a 32.5-kilometre causeway bridge. The master plan was to complete 50 berths by 2020, which would cost over US$10billion. The master plan also includes a logistics park and new harbor city on the main land. Lianyungang, a northern port city in Jiangsu province, was racing to build an international port after winning State approval to construct a 300,000DWT(Dead Weight Ton) deepwater channel and a 300,000 DWT berth for handling crude and ores, which would associate its development with the neighboring Yangshan Deep Water Port in Shanghai and existing Ningbo Port.
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