Does China’s shipbuilding ‘white list’ create a blacklist?

The recently announced Chinese shipyard “white list” is meant to be a step-change for China’s shipbuilding sector in terms of singling out yards that are worthy of policy support.

A first batch of 51 state-owned and private enterprises was announced by the ministry of industry and information technology in early September, and 21 more are being considered, putting the potential total at 72. At present, China has around 300 active yards, and the China Association of the National Shipbuilding Industry typically tracks 87 leading Chinese yards for regular statistical records.

Looking at the numbers, a question that arises is what would happen to the remaining yards that did not make it to the “white list”? Being able to receive favourable policy support and gain easier access to loans especially from state banks are the key advantages for “white listed” yards. As for those “unlisted” yards, even if they are actually decent and reliable, they could be forced to shut down if access to both bank loans and government support is totally cut off. To put it crudely, those that do not make it to the “white list” are in fact “blacklisted”.

Beijing wants to see only 10 major yards account for 75% of the country’s share of shipbuilding, as the sector undergoes a consolidation to remove surplus yard capacity. The lean ‘white list’ yards among 300 active enterprises is perhaps the strongest indication of Beijing’s resolve to streamline the shipbuilding industry.

But whether the grand aim of the “white list” can indeed solve the problem of excessive yard capacity is as yet unknown. Shipbuilding firms that do not qualify may turn their yard capacity to building offshore units instead, potentially creating a new problem of overcapacity in the offshore sector. Banks may also be more willing to extend loans for offshore deals and overlook the absence of their ‘white list’status.

Questions also linger over the selection process, as financially-shaky Jiangsu Rongsheng Heavy Industries and Guangzhou Shipyard International are listed, even when they are both planning to restructure.

Beijing can definitely afford to shed more light on the grey areas of its “white list” policy.
Source: Seatrade Global