Ever since China adopted reform and opening policies, China has laid a solid foundation in capital, talent, technology and infrastructure for its shipbuilding industry, and low labor cost is the most important advantage for China’s participation in international competition in the shipbuilding market. The entry of large foreign shipbuilding enterprises into China will also be complementary for both sides, which has become a consensus in China’s shipbuilding industry.

Foreign Capital Utilization in the Industry of Equipment for Transportation in 2005 (Unit: US$ billion)

In 2005, the Shipbuilding industry make use of foreign-invested programs 104 items, carry out Contracted Value of Foreign Capital to be Utilized $1368.70 million and Total Amount of Foreign Capital Actually Used $227.10 million.

Therefore, although there are few wholly foreign owned and joint venture enterprises in China’s shipbuilding industry as in other industries, this situation is gradually changing, with the following cities outstanding in utilizing foreign funds:

Dalian

Daeyang Shipping Co., Ltd from South Korea invested US$98 million in the shipbuilding industry in Dalian to form Dalian Daeyang Shipbuilding Engineering Co., Ltd. Just recently, the company held a ground-breaking ceremony. As a wholly owned Korean company, it is mainly engaged in the designing and making of components for special-purpose ships. With its total investment reaching US$98 million and register capital standing at US$50 million, the company is the largest foreign funded company within the shipbuilding industry in Dalian. Almost at the same time, Oriental Precision & Engineering Co Ltd—another company from South Korea--is also investing in and constructing a large shipbuilding enterprise with Dalian Shipbuilding Industry Corp.—Dalian Oriental Precision & Engineering Ship Fittings Company. With US$29.88 million of investment, the total construction of the company is scheduled to be completed by 2007, its designed annual capacity is 80,000 tons of steel products, 150 complete upper structures for ships and other related products. This project is the first enterprise that Dalian has introduced specially engaged in the building of upper structures for ships. Its capacity and technical level will make Dalian Development Zone become the largest base for the production of upper structures for ships and heavy crane equipments.

Ningbo

Recently, Samsung Group from Korea planned to invest RMB440 million to expand Samsung Heavy Industry’s new factory in Ningbo. Samsung Heavy Industry (Ningbo) was founded in 1996, mainly engaged in producing ship sections and hatches, with its products all shipped back to its shipbuilding factory in Korea for assembly. Experts estimate that even with freight included, the production cost of the ship sections produced at the Ningbo factory is 20-30% lower than at the factory in Korea.

Yantai

Recently, Daewoo Shipbuilding from South Korea signed a contract with Yantai Economic and Technology Development Zone to invest US$1.5 billion in a factory at Bajiao port at Yantai, which covers an area of 5 square kilometers and will mainly produce oil tankers with a tonnage of over 70,000 tons, container ships, super large passenger liners and LNG ships, with an initial investment of US$100 million. The factory is projected to go into production in 2008 and to be completely finished by 2017. Its production capacity will be 4.14 million tons of carrying capacity almost a new Daewoo at Yantai Development Zone. The biggest shipbuilding enterprise—South Korea’s Hyundai Heavy Industries is also in contact with related enterprises in Yantai to establish a shipbuilding base. It has acquired Qingdao Lingshan Shipbuilding Company with US$7.4 million.

Zhoushan

The IMC Group from Singapore plans to invest US$60 million to co-construct a large ship-repairing base on Mazhi Island in Zhoushan and 300,000-ton and 100,000-ton dry docks and bulk ports with a private company—Zhejiang Yongyue Shipping Company.  

All in all, China has advantages in labor, talent and the startup of large boatyards, and is competitive in price of material and general equipment. Therefore, with the transfer of the international shipbuilding industry, it’s a sure tendency for foreign capital to build shipbuilding bases in China.