THE problem with China’s shipbuilding industry is it is just very good at what it does.

Stripped of the political objections, accusations and outright protectionist sentiment, even China’s most-vociferous critic would have to agree its rise to shipbuilding dominance has been quite astounding and deeply impressive.

China has been leading its nearest rivals South Korea for several years now and Japan’s somewhat lacklustre third-place bid to remain in the race is rarely even a consideration for Chinese yards these days.

But the speed at which China’s orderbook has grown over the past two years has caught even seasoned newbuilding analysts by surprise. Last year alone saw China grow its share of the global orderbook by nearly another 10%.

The stranglehold that China has on shipbuilding is built off years of political support, both in terms of policy and subsidies, but it has created an incredibly efficient package that is hard to resist.

Cost of course is the dominant factor, but just as China has eclipsed everyone else in the race to lead on electric vehicle production, Chinese yards, supported by Chinese leasing houses, have refined an industrial process to a near art form.

As much as Donald Trump does not like it, the inconvenient truth is that China is very good at building ships.

So, is the US Trade Representative’s plan to target Chinese shipping and shipbuilding a case of closing the stable door long after the horse has bolted? Well, in some ways yes. But that doesn’t mean that it won’t go ahead and cause chaos in its wake.

China-built ships accounted for nearly 30% of US arrivals last year, which is a sobering thought for an industry mentally calculating the myriad permutations of a proposal that may or may not become reality with any number of as yet unknown amendments.

The USTR plan, as it has been presented, covers not just Chinese-built ships but also vessels of operators that have Chinese-built ships in their fleets, as well as operators with Chinese ships on order. So only focusing on Chinese-built ship arrivals severely underrepresents the issue at hand, but it does offer a tangible starting point to understand the scale of the problems that potentially lie ahead.

The suggestion that an exorbitant levy on China-linked ships will allow the Trump administration to somehow compensate owners of US-flagged or US-built ships to cover the Grand Canyon-sized cost differential is an interesting plan. And by interesting we mean it is a plan with holes so big you could pilot a VLCC through them currently. But it also presumes that Chinese, or China-linked ships will continue to call at US ports if said plan is manifested into reality.

There is a distinct possibility that they won’t, and what will instead be created is a very disruptive two-tier market that offers very little value for anyone, least of all the US.

Until that happens of course China’s yards will continue to churn out very good, cost efficient ships of all types and sizes that the industry wants.

We, along with everyone else, await the outcome of the USTR hearing next week to see what happens next. 

Richard Meade
Editor-in-chief, Lloyd’s List

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