From shipbuilding power to ship power, China still needs to do something

The shipbuilding industry, known as the "crown of comprehensive industry", is related to nearly 100 industries such as steel, chemical, machinery and electronics, and has a very strong driving role in the development of the national economy. At present, China has become the world's largest shipbuilding country, and has formed a number of large shipbuilding enterprise groups with strong international competitiveness. In 2018, China's shipbuilding industry's new orders, shipbuilding completions and hand-held orders reached 36.67 million DWT, 34.58 million DWT and 89.31 million DWT, accounting for 43.9%, 43.2% and 42.8% of the global total, respectively. At the same time of increasing scale, China's shipbuilding industry has made continuous breakthroughs in the fields of ultra-large container ships, large gas carriers, high-end ocean engineering equipment, independent design and construction of aircraft carriers, and deep-sea manned submarines. At present, China's shipping enterprises are moving towards the world's first-class large-scale shipping enterprise groups.

1. Comparison between Chinese shipbuilding enterprises and world-class large-scale shipbuilding enterprises

From the perspective of comprehensive index analysis, China State Shipbuilding Group (CSSC, CSIC), Yangzijiang Shipbuilding Industry has entered the ranks of the world's large ship enterprise groups, but there is still a gap with Japan and South Korea's first-class large enterprises in labor production efficiency.

(1) China's shipping enterprises have obvious advantages in scale

From the perspective of shipbuilding completion, Chinese shipping enterprises have comparative advantages. In 2018, China accounted for five of the top ten in the world, and CSSC and CSIC were second only to Hyundai Heavy Industries Group of Korea, which ranked first (see Table 1). From the perspective of industrial concentration, China's top five shipbuilding companies accounted for 80% of domestic shipbuilding completion, lower than South Korea. In October 2019, The State Council approved the joint restructuring of China Shipbuilding Group and China Shipbuilding Heavy Industry Group to establish China Shipbuilding Group, at the same time, South Korea's Hyundai Heavy Industry Group also announced the acquisition of Daewoo Shipbuilding and Marine Engineering, the production scale of the two new restructuring enterprises will be comparable, and Japanese shipping companies have recently announced business restructuring to reduce the scale disadvantage of Chinese and South Korean companies.

Table 1 Shipbuilding completions of the world's major shipbuilders in 2018.

In terms of revenues, Chinese shippers lead the way (see chart 2). China Shipbuilding Industry Group has grown rapidly in recent years, ranking first, and China Shipbuilding Group is in the leading position of the second tier. After the establishment of China State Shipbuilding Group, the scale of operating income will maintain about 60 billion US dollars, far ahead of Japanese and Korean ship companies.

Table 2 Business income of major shipping companies in the world

From the perspective of total assets, China's leading shipping enterprises have obvious advantages in asset scale (see Table 3). Before the merger, CSIC was 1.5 times the size of Japan's Mitsubishi Heavy Industries, and the combined China State Shipbuilding Group will have more than three times the assets of the Japanese and South Korean shipbuilders. But the assets of other Chinese shipbuilders are still much smaller than those of their Japanese and South Korean counterparts.

Table 3 Total assets of major shipping companies in the world

On the whole, the operating income and asset scale of China's state-owned large shipbuilding enterprises have surpassed those of Japan and South Korea, and China State Shipbuilding Group has become the world's largest ship enterprise. In terms of shipbuilding completion, if the merger of Hyundai Heavy Industries and Daewoo Shipbuilding and Marine Engineering is completed, the newly formed company's annual global shipbuilding completion share will be similar to or slightly exceed that of China State Shipbuilding Group.

(2) Profitability is comparable to that of world-class shipping enterprises

From the perspective of net profit margin, the profit level of Chinese enterprises is relatively high. Yangzijiang Shipbuilding, a privately owned company, has a five-year average net profit margin of more than 15%, and CSSC and CSIC rank high, and the earnings stability is better than that of South Korean companies.

From the perspective of asset-liability ratio, there are obvious differences between Chinese shipping enterprises, which are generally lower than Japanese and South Korean shipping enterprises (see Table 6). Among them, the asset liability ratio of the Yangtze River shipping industry is the lowest, which is lower than 50% for many consecutive years, and only 34.1% in 2018; Csic Group has been below 60% for two consecutive years, and CSIC Group has maintained an average of about 70% in the past five years.