August 5, 2013 / 4:08 AM / 4 years ago

China lays out plans to restructure ailing shipbuilding sector

SHANGHAI, Aug 5 (Reuters) - China has laid out a detailed three-year plan to restructure its massive shipbuilding industry, urging local governments to halt approvals of new projects and companies to move up the value chain by building high-tech vessels.

The plan, issued late on Sunday, is the latest move by Beijing to crack down on industrial overcapacity and shift away from its old investment-driven economic growth model to focus on boosting productivity and domestic consumption.

Local authorities and governments need to strictly control new capacity by halting approvals of new shipbuilding facilities as well as stopping projects that had gone ahead without securing necessary permits, the State Council, or China’s cabinet, said in a plan for 2013-2015.

The cabinet also called on financial institutions to stop all lending to companies embarking on new shipbuilding facilities.

However, shipbuilders that are restructuring their business and moving toward mergers and acquisitions are encouraged to issue corporate bonds to secure funds.

The cabinet said in early July it would cut off credit to force consolidation to a range of industries struggling with sluggish demand and severe overcapacity to rebalance the economy and focus more on high-end manufacturing.

As part of the consolidation plan, Beijing aging ships dismantled and wants shipbuilders to build high-end offshore engineering products, which it expects will have higher demand in China’s domestic market.

Chinese shipbuilders should aim to secure 25 percent of the global market share for high-tech ships and one-fifth for the global offshore engineering product market by 2015, the cabinet said.

China’s shipbuilding sector, the world’s largest, has been plagued by overcapacity, a severe shortage of new orders, a persistent decline in prices for building ships and a slump in the freight market, forcing many shipbuilders out of business in recent years.

The China Association of the National Shipbuilding Industry said on its website that the combined profits of 80 major shipbuilders fell 17 percent for the first half from a year ago.

China Rongsheng Heavy Industries Group, the country’s largest private shipbuilder, warned of a net loss in the first half and has appealed for financial help from the Chinese government and big shareholders to cope with slumping orders and high debt.

Editing by Matt Driskill

Our Standards:The Thomson Reuters Trust Principles.
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