New policy to end that sinking feeling

'Capable shipyards' to receive tax incentives and technical support to develop 'green ocean vessels'

China is taking another round of decisive measures to stabilize the revenue growth of its shipbuilding industry on a solid foothold amid a declining global shipping market, said a government official.

Chen Bin, director-general of the department of industry of China's National Development and Reform Commission, said the Chinese government will offer favorable tax policies and technical assistance to capable shipyards to develop greener ocean vessels, regeneration of aging ships and support new orders of law enforcement and other public service vessels for domestic needs.

"The development of offshore engineering products will be treated as a priority to diversify the production categories in Chinese shipyards because the demand for offshore engineering products such as energy vessels, offshore pipe-laying vessels and oil drilling rigs has steadily increased in recent years," Chen said.

"Even though offshore engineering products are more expensive and complex to build, the burgeoning global demand for energy resources is expected to keep orders flowing," Chen said.

Boosted by a previous investment package of infrastructure projects such as road, airport and port, as well as dynamic international trade activities, China's shipbuilding sector enjoyed a golden developing era between 2005 and 2008.

However, the country's shipyards began to face weaker market demand in 2009, when an overcapacity in the international shipping business and a sharp drop in global trade volumes occurred.

Chen said the turmoil in the global shipping industry has caused Chinese ship makers difficulties. Because they are heavily reliant on foreign orders for profits, it is time for them to seek new market growth points.

The Chinese Association of the National Shipbuilding Industry reported sinking profits in the first half of 2013. Profits of 80 major shipbuilders monitored by the association totaled 3.58 billion yuan ($580 million), a 54 percent drop from the same period a year earlier.

A total of 20.6 million deadweight tons of new vessels have been completed for both domestic and international shipowners in the first half of the year. This represents a 36 percent decrease from the previous year.

Currently, China has 1,600 shipbuilding-related enterprises (including 800 large shipyards), with an annual industrial output value of 800 billion yuan. A total of 1.5 million people work in the industry.

Chen said a declining Chinese shipbuilding industry can cause a direct financial effect on industries such as steel and machinery because they are all closely related.