Beijing to bail out shipping industry

PUBLISHED : Thursday, 12 February, 2009, 12:00am
UPDATED : Thursday, 12 February, 2009, 12:00am

Firms ordered to shelve new dockyard plans

Beijing has approved measures to support the country's shipbuilding industry and is considering a proposal to aid light industry in an effort to keep companies, hard hit by the slowing economy, afloat.

However, the proposal for light industry triggered concerns of protectionism because the 'buy local' provisions in the initial document remained intact in the final version, observers said.

The support scheme for the shipping industry, the fifth set of industry-specific measures rolled out by the central government in the past four weeks, ordered shipbuilding companies to shelve their plans to set up new dockyards in the next three years, Xinhua reported.

The authorities also promised to help shipping companies secure the delivery of existing deals for new ships by asking state-controlled banks to increase access to credit for domestic buyers.

Dwindling international trade as a result of the global economic crisis has begun to bite hard among mainland shipbuilders, which have a collective annual capacity of about 60 million tonnes, according to official statistics.

Apparently aimed at heading off collapse caused by overcapacity, the State Council guidelines encourage mergers and acquisitions in the industry and promise financial support from banks.

The government also vowed to foster the transformation of some existing shipbuilding operations into after-sales service centres.

Separately, the scheme for light industry, which is still pending State Council approval, calls for an increase in import tariffs on 'high-end consumer goods' produced overseas.

It also urges the Beijing authorities to favour domestic manufacturers in government procurement campaigns, the Shanghai Securities News reported.

This emerged two days after Jiang Zengwei, a vice-minister of commerce, promised to avoid protectionist measures in the national stimulus package.

Beijing would 'treat domestic and foreign goods equally', Mr Jiang said.

The United States government sparked controversy with a provision in its proposed US$819 billion stimulus package that American steel and iron be used for infrastructure projects funded by the scheme, unless the cost is 'prohibitively expensive'.

'Localisation-favouring policies have long existed in mainland government thinking,' said a Hong Kong-based economist with a foreign-owned investment bank.

'But this kind of explicit wording, if not withdrawn in the final version of the plan, could sow the seeds of protectionism, especially under the current climate.'

The light industry bailout, which covers 19 sectors from food to home appliance manufacturing, was drafted by a team of experts assembled by the National Development and Reform Commission, sources said.

In contrast, most of the other support schemes were compiled by respective industry associations.

Apart from the latest one for shipbuilding, the State Council has so far given approval for bailout plans for the vehicle, steel, textile and machinery manufacturing sectors.

Zhao Jinhou, an analyst with Shenyin Wanguo Securities, said the main part of the proposed light industry support scheme would be the reduction of consumption taxes to raise domestic consumer demand for household goods.