China’s two largest shipyards plan to double their construction capacity by 2010. Ms. Katherine Espina of Bloomberg News has reported that China State Shipbuilding, the nation's largest, will have a potential output of 12.3 million deadweight tons by 2010, up from 6 million tons last year, while China Shipbuilding Industry will double its annual capacity to 10 million deadweight tons.

This increase will challenge South Korea as the world’s largest builder of merchant ships. China, also the world's largest steel producer, last year overtook Japan as the world’s No. 2 builder of merchant ships. Chinese yards currently have 24 percent of the global order book for new ships while South Korea has 33 percent according to London-based shipbroker Clarkson.

China is encouraging ship production and related developments in several categories:

(1) Design and manufacturing of high-tech, high-function and special-purpose ships, and large ships of 100,000 deadweight tons and larger.

(2) Construction of passenger ships, combination passenger-cargo ships, and train ferries.

(3) Construction of liquid natural gas ships with a capacity of 5,000 cubic meters and larger.

(4) Construction of container ships with a capacity of 3,000 TEUs and larger.

(5) Design and construction of large deep-sea fishing boats, marine drilling vessels, oil rigs, marine floating production storage and offloading structures, and other offshore engineering equipment.

(6) Production of marine power systems, power plants, and special support machines; ship control and automation devices; telecom and navigation equipment; instrumentation; other marine equipment.

The increase in merchant ship construction comes as Chinese yards are also producing record numbers of surface naval ships and submarines.

According to Ms. Espina, quoting Alan Gavin, president for marine at London-based Lloyd's Register, the largest challenge for the Chinese shipyards “will be skilled workers... [China] can
build shipyards as there's plenty of land here, but in the end they have to build a ship in a quicker time frame.”

The China Shipbuilding Industry plans to cut the man-hours required for each ton built by spokesman said that it has already cut the construction period of a 175,000-deadweight-ton bulk carrier to 300 days from 480 days at the start of 2005. Both firms operate several shipyards.

China plans to take a 30 percent share of the global shipbuilding market within the next ten years, a government official, Zhang Xiang Mu, said recently. He denied that the growth of China's yards would lead to an oversupply of global shipbuilding capacity.

In some respects the major problem facing Chinese shipbuilders will be the design and development of advanced merchant ships. Innovation is not the strong suite of the Chinese shipbuilding industry. The acquisition of foreign designs and effectively producing them will be a critical factor in the potential success of the Chinese shipbuilding industry in achieving its goals.