Chinas shipbuilding to consolidate

Early in 2009, the State Council, China’s cabinet, approved the Plan for Adjusting and Rejuvenating the Shipbuilding Industry during the year 2009 to 2010.

Besides a series of measures supporting the industry, the plan also highlights the need to address overcapacity and adjust structure. On 23 December, 2009, China’s top authorities, including the People’s Bank of China (PBoC), the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission, jointly issued a document to rein in overcapacity by financial means.

Although the document did not specifically list the individual shipyards, it has cast clouds over the industry where overcapacity looms large.

Statistics from the China Association of National Shipbuilding Industry shows Chinese shipbuilders produced 36.54 million dwt of ships in January to November, up 41% on year. They received 22.94 million dwt of new orders, down 61% on year. Over 65% of shipyards received no new orders in 2009; this was especially true of some new shipyards.

The policies issued by the PBoC and the other three regulators are very specific in purpose and hard-hitting, cutting industries with overcapacity from sources of capital, said Liang Zhiyong, an analyst with the research center of the China State Shipbuilding Corporation.

The policy has all ready had some effect. Bank loans are going to large efficient companies and small private shipbuilding firms are finding it hard to get loans. As time goes by, a number of small and medium size shipbuilders will eventually cease to operate.

Liu Qi, chairman of the Xinhai Ship Group, a shipbuilder in eastern China’s Zhejiang province, told China Industrial and Economic News that its company has halted its shipbuilding business last year and had no plans to resume operation.