July 5, 2007
Warning on Chinese shipbuilding overcapacity
Officials see signs of looming overcapacity in China's shipbuilding sector,
A report in China Daily says shipbuilding capacity in the country will exceed 40 million deadweight tons a year in 2010 if new yards planned by investors are completed, according to data from China Association of National Shipbuilding Industry.
As of last year, industry annual capacity was 14.6 million deadweight tons. The projected 40 million dwt figure is much larger than a government plan unveiled in September that seeks to have a total shipbuilding capacity of 23 million deadweight tons at the end of the decade.
China Daily quotes You Shumin, an official from the Commission of Science, Technology and Industry for National Defense, as saying: "The government's plan is not very rigid. But 40 million deadweight tons is really too much for the shipbuilding sector."
You is quoted as saying that many projects funded by investors don't comply with China's regulations for the shipbuilding sector..
According to the rules, total input in a new shipbuilding project should reach at least 2 billion yuan, of which no less than 40 percent should come from investors themselves. The Chinese side should hold a stake of at least 51 percent in their shipbuilding joint ventures with foreign partners. Sino-foreign ventures are required to build their own technical centers.
Projects for low-and-medium-speed diesel engines for vessels are not permitted in China, according to the China Daily report.
"We will implement the existing regulations more strictly and work out new measures to put the sector in order," You told China Daily. She also warned of investment risks in the sector, although the global ship market has been flourishing since 2003.
"Demand for new vessels is likely to fluctuate widely in coming years," she stressed. "Shipyards in China will suffer a lot from global market fluctuations if overcapacity cannot be prevented, as they rely heavily on orders from foreign buyers."