Merger of China’s shipbuilding giants gets the green light

China on Friday announced the merger of the country’s two largest state-owned shipbuilding giants, a step Beijing has been preparing for nearly a decade to strengthen the competitiveness of its shipbuilding industry.

The intention to merge the Shanghai-based China State Shipbuilding Corp (CSSC) and the China Shipbuilding Industry Co (CSIC), based in Dalian, Northern Liaoning province, was announced in a statement on the website of the state-owned Assets Supervision and Administration Commission of the State Council, China’s cabinet.

The merger would enable China to establish a shipbuilding giant with a combined revenue up to 1 trillion yuan (US$141.5 billion), capable of building vessels ranging from warships, like aircraft carriers, to civilian ships such as container ships and oil tankers, said a source familiar with the merger plan.

“This merger has been in the making since Hu Wenming, a former party leader of the state-owned aviation industry, was assigned to CSSC as party secretary in 2010,” the source said, requesting anonymity because of the sensitivity of the issue.

“The merger plan was put on the drawing board at a time when the world shipping industry had entered a golden period in 2009, and the business of CSSC and CSIC was at its peak, but [China’s] analysis indicated a decline was on the horizon, as has actually happened in recent years.”

CSIC and CSSC were part of the same group until 1999 when they were split into two separate entities. Since then, China has overtaken South Korea and Japan to become the world’s largest builder of merchant ships, a rise spurred by the boom in world trade and the country’s accession to the World Trade Organisation in 2001.