China determined to become world shipbuilding force

By Tim Johnson, Knight Ridder Newspapers
Thu Jun 16, 3:50 PM ET

DALIAN, China - China, once a global maritime power, is rushing headlong to capture a prized spot as the world's largest shipbuilder.

At vast shipyards such as one here in northeast China, thousands of workers weld steel plates that form the hulls of ships for export to dozens of countries around the globe.

"We believe, in 10 years' time, shipbuilding in China will jump up to a new level," Zhang Guangqin, a vice minister whose portfolio includes shipbuilding, told a news conference Thursday in Beijing.

China now ranks No. 3 in the world in shipbuilding after nearby Japan and
South Korea, but it's plowing colossal investment into its shipyards and plans to seize the No. 1 ranking by 2015. Earlier this month, workers broke ground on a project near Shanghai that will turn an island in the Yangtze River into the world's largest shipbuilding base.

China's growing maritime industrial clout is another sign of its expanding global reach. As China's exports soar, its largest companies, now competing on a global scale, hunt even in the United States to buy up onetime competitors. Chinese diplomats are signing agreements with far-flung nations to ensure access to raw materials, such as oil.

At the Dalian New Shipyard, China is building five supertankers - known as very large crude carriers - for oil-rich
Iran, with which it's forging a robust energy alliance to fuel its own deepening appetite for crude.

Most Chinese shipyards have order books that are filled for three or four years.

"Eighty-five percent of the new ships in the order books in China are for export," Zhang said, noting that buyers include companies in the United States, Japan, Germany, France and Canada.

China is using an annual investment of some $1.2 billion in shipbuilding to leverage other industries, such as steel making and machinery building. Shipbuilding is one of the few sectors in which China doesn't accept joint-venture agreements with foreign companies, so it isn't gaining access to foreign technology.

Even so, just about every type of ship imaginable - except for ocean liners - is coming out of dry dock along China's eastern shipyards, including bulk carriers to haul raw materials, container ships and liquid natural gas carriers.

"The amount of investment China is putting in is huge. Nobody else can afford it. It's greater than anywhere else," said Peter Cheng, a naval architect and consultant based in Hong Kong.

For many Chinese, the shipbuilding boom is a throwback to the nation's glorious past. Historians say Chinese shipbuilders were the best in the world for more than a millennium, culminating in the years 1405 to 1433, when seafarer Zheng He carried out seven epic voyages to the South Pacific, Indian Ocean, Persian Gulf and Africa.

Zheng's largest ship was far larger than the tiny vessels Christopher Columbus used to make his way to the New World in the late 1400s.

Experts in the field say China's growth in shipbuilding is preventing a pinch in global cargo movement as shipyards elsewhere are stretched to near capacity.

From 2000 to 2004, China's average growth rate for shipbuilding was 26 percent a year, Zhang said. It reached 14 percent of the world market in tonnage last year. By the end of this year, its production should climb to 18 percent of the world market, he added. By 2010, it will reach 25 percent, he said.

On June 3, workers broke ground on the $3.6 billion Changxing shipyard at the mouth of the Yangtze River, a project that will triple Shanghai's shipbuilding capacity in the next decade.

"With the construction of Changxing, we are breathing down the necks of Japan and South Korea," Xu Lunfang, an engineer at China State Shipbuilding Corp., told the state Xinhua News Agency. "The market competition is set to intensify."

The ambitious naval fleet-building efforts of the People's Liberation Army, which is beefing up its submarine fleet, are helping China's state-owned shipbuilders.

About 10 percent of shipbuilding activity is for military purposes, Zhang said, though he declined twice to respond to questions about whether China intends to build its first aircraft carrier.

Not all maritime consultants think China will coast to capture the No. 1 spot in shipbuilding.

"It's not an easy industry, and it has a history of devouring the players that are in it," said Matthew Flynn, a maritime consultant in Hong Kong.

While China is adding huge shipyard capacity, Flynn said, it lacks highly skilled management that can allow those shipyards to increase productivity.

"Most of these Chinese shipyards don't yet have that information flow-management capability," Flynn said.

I think if China ever builds an aircraft carrier the US military will shit a brick.