In a bid to enhance the global competitiveness of its shipbuilding sector, China's two largest state-owned shipyards are merging to create the world's biggest ship manufacturer as part of the country's ongoing efforts to reform and strengthen its state-owned enterprises (SOEs).
Earlier this month, the China State Shipbuilding Corporation (CSSC) and the China Shipbuilding Industry Corporation (CSIC), two listed SOEs, announced plans to merge. The resulting company is expected to boast annual sales exceeding 17 billion U.S. dollars.
According to CSSC, the merger aims to "accelerate the high-quality development of the ship assembly business, standardize competition in the industry, and improve the operational quality of listed companies."
This move is in line with China's broader strategy of consolidating SOEs to increase their global competitiveness, experts said.
"Restructuring is part of the deepening reform of SOEs, aligning with national strategies and advancing the equipment manufacturing industry. The new company from this merger will enhance R and D and production capacity, improving its global competitiveness and driving China's shipbuilding industry toward high-end manufacturing and greater innovation," said Tian Lihui, director of the Institute of Finance and Development at the Nankai University.
The merger reflects a broader trend of consolidation among China's listed companies.
According to a financial sector insider, this trend has been partly driven by favorable policies from the China Securities Regulatory Commission (CSRC), which earlier this year introduced measures to encourage mergers, acquisitions and restructuring.
"China's securities market is witnessing a surge in mergers and acquisitions, with companies -- both state-owned and private - expanding their scale and strengthening their positions through strategic integrations. We have also seen some cases, not just the shipbuilding industry, including the integration in the securities industry. In the next phase, I anticipate an increase in the frequency and intensity of such corporate consolidations, not only among central enterprises but also involving private enterprises. This trend is likely to continue, with more cases emerging in the future," said Chen Xi, investment director and partner of the Red Horse Investments Group, a private equity firm in China.
China's shipbuilding sector has shown impressive growth in the first half of this year.
According to data released by the Ministry of Industry and Information Technology (MIIT), from January to June, China completed shipbuilding projects totaling more than 25 million deadweight tonnes (DWT), a measure of how much weight a ship can carry, representing an increase of 18.4 percent compared to the same period last year. New orders surged to more than 54 million DWT, reflecting a remarkable year-on-year growth of 43.9 percent.
By the end of June, the order book stood at 171.55 million DWT, up 38.6 percent from the previous year.
The MIIT's data also demonstrates China's dominant position in the global shipbuilding market. In the first half of this year, the country's shipbuilding completions, new orders, and order book as measured by DWT accounted for 55 percent, 74.7 percent, and 58.9 percent of the global totals, respectively.
In 2023, the three key market indicators stood at 50.2 percent, 66.6 percent, and 55 percent.
China's two largest shipyards merge to form global shipbuilding giant
