Recently, China’s shipbuilding industry, known as the “South Ship”, has absorbed and merged with China State Shipbuilding Corporation, also known as the “North Ship”. This marks the second reorganization of the two major state-owned shipbuilding enterprises since their merger in 2019. The merger of the “South Ship” and “North Ship” comes at a time when the dominance of China in global shipbuilding is being challenged during Trump’s second term in office, leading to a weakening position of the Chinese Communist Party in the global shipbuilding industry. The timing of the two reorganizations of the South and North ships coincides with the outbreak of internal corruption scandals, raising suspicions of a connection.
China Shipbuilding Industry Corporation (referred to as China Shipbuilding, Shanghai Stock Exchange: 600150) and China State Shipbuilding Corporation (referred to as China State Shipbuilding, Shanghai Stock Exchange: 601989) have recently initiated a merger.
On August 15, China Shipbuilding published the second interim announcement regarding the implementation of the objections by dissenting shareholders in a stock exchange absorption merger with China State Shipbuilding.
On August 14, China State Shipbuilding announced that it had submitted an application to voluntarily delist its A-shares from the Shanghai Stock Exchange, which, once approved, would lead to its delisting. Subsequently, China Shipbuilding began implementing the stock exchange absorption.
Earlier, on the evening of August 5, both companies simultaneously announced that the transaction for China Shipbuilding’s stock acquisition and merger with China State Shipbuilding had received formal approval from the China Securities Regulatory Commission. Following this, trading of both companies’ stocks was suspended from August 13 onward, with an unspecified resumption date. Subsequently, China Shipbuilding is set to issue shares to all shareholders of China State Shipbuilding through a stock absorption merger and acquire all its assets, leading to the delisting of China State Shipbuilding.
After the reorganization, these two companies are poised to become the largest shipbuilding company globally. Several foreign media outlets only mentioned that China Shipbuilding and China State Shipbuilding were originally part of the same company before splitting in 1999, without noting that these two major shipbuilding enterprises had already merged once before under the CCP.
Public records show that the Chinese government established the China Shipbuilding Industry Corporation on May 4, 1982. On July 1, 1999, the China Shipbuilding Industry Corporation was split into China State Shipbuilding Corporation (CSSC, also known as South Ship) and China State Shipbuilding Corporation (CSIC, also known as North Ship). Shipbuilding assets north of the Yangtze River, including ship assembly, research institutes, and some non-ship businesses, were under CSIC, while ship assembly assets south of the Yangtze River were under CSSC.
On October 25, 2019, CSSC and CSIC merged to form China Shipbuilding Corporation.
The original listed companies under CSSC and CSIC became China Shipbuilding and China State Shipbuilding (now China Shipbuilding), respectively, which became part of the China Shipbuilding Group, a military and civilian integrated shipbuilding industry enterprise. The two companies are still positioned as South Ship and North Ship. China Shipbuilding focuses on container ships, LNG/VLEC (liquefied natural gas), and other specialty ship types, whereas China State Shipbuilding focuses on oil tankers, bulk carriers, naval vessels, and marine equipment.
According to the 21st Century Business Herald, by the end of 2024, the total combined assets of China Shipbuilding and China State Shipbuilding exceeded 400 billion RMB. As of the end of 2024, the two companies had a combined order tonnage of 54.92 million carrying tons, accounting for 15% of the total global order volume. China Shipbuilding Group ranked first globally in terms of orders among single shipbuilding entities.
However, reports also point out that while the merger of the South and North ships has attracted attention, the “Section 301 Investigation” initiated by the United States once caused a setback in the stock prices of China Shipbuilding and China State Shipbuilding, leading to uncertainties for this reorganization.
The second merger of the two major shipbuilding state-owned enterprises from China, comes at a time when Trump is in his second term, and the United States is looking to revitalize its domestic shipbuilding industry amid changes in the global shipbuilding industry. Moreover, China’s shipbuilding industry is currently facing difficulties.
In April of this year, Washington announced plans to levy high port fees on ships built or operated by China starting from October, gradually increasing over the coming years. Each ship related to China sailing to the United States will be required to pay port fees based on tonnage, up to five times per year. However, ships ordered by the United States will be exempt from these fees.
This policy has already had a significant impact. According to the latest industry data, in the past six months, China’s dominance in global shipbuilding seems to have weakened.
On July 29, the Overseas Economic Research Institute of the Korea Development Bank released a report stating that South Korea’s market share in new ship orders (measured by total ship tonnage) increased from 15% last year to 25.1% in the first half of this year. Meanwhile, China’s share decreased from 70% to 51.8%.
Furthermore, according to a report from maritime consultancy firm Clarksons Research, new orders at Chinese shipyards in the first half of the year decreased by 68% year-on-year to 26.3 million gross tons. In contrast, the second-ranked South Korea saw a decrease of only 7% to 14.2 million tons.
Following a recent trade agreement between the U.S. and South Korea, with the U.S. imposing a 15% tariff on Korean products, South Korea pledged to invest $35 billion in the United States. South Korean President Lee Jae-myung stated that $15 billion of this investment will be specifically allocated to the shipbuilding industry.
Japanese shipbuilders are also seeking to regain market share. In the 1990s, Japan was a leading force in the shipbuilding industry, accounting for about half of the global annual production. In June of this year, Imabari Shipbuilding and Yukito Higaki, chairman of the Japan Shipbuilders’ Association, stated that Japan aims to increase its market share in the shipbuilding industry from the current 9% to 20% by 2030.
Director of the Strategic and Resource Institute at the Taiwan Institute for National Defense and Security, Su Ziyun, told Dajiyuan that the U.S. is collaborating with multiple countries in shipbuilding. The cooperation between the U.S. and South Korea primarily involves the transfer of South Korea’s shipbuilding technologies, such as automated welding, to the U.S., creating a different form of vertical and horizontal division of labor. The U.S. and Japan have also reached agreements on ship repairs, while Taiwan has signed a memorandum of understanding with U.S. defense contractors to build light cruisers.
“The cooperation between China’s two major shipbuilding enterprises indicates a change in the future landscape of the global shipbuilding industry,” Su Ziyun said.
Researcher at the Taiwan Institute for National Defense and Security Studies, Shen Mingshi, told Dajiyuan that Trump aims to revive the traditional defense industry in the U.S., especially since many ships in the U.S. fleet are aging. In the short term and in the absence of a capable shipbuilding industry, Trump hopes that South Korean shipyards will invest in the U.S., stimulating a wave of military industrial enterprises.
President Trump’s tariff actions could reduce global trade volumes, resulting in decreased demand for cargo ships. Su Ziyun stated that China’s shipbuilding industry had an advantage in the past based on low prices to win orders. However, regardless of such advantages, the future demand for global shipping is ultimately limited.
Moreover, in 2025, due to continued weak domestic demand and slowing foreign trade in China, inland waterway transportation seems to be losing vitality.
In February of this year, videos circulated online showing a deserted Yangtze River with numerous empty ships unable to load cargo. Oddly, while the inland waterway transportation appeared stagnant, China’s shipbuilding industry was unusually bustling. On February 10, Wu Bo, general manager of Chongqing Yunyang Minqiang Shipbuilding Company in China, stated in a media interview that there was no availability for new orders this year, as all orders for the entire following year were already fully booked.
The Chinese shipbuilding industry has long dominated the global market with low prices, and in 2024, the Chinese authorities introduced subsidies policies such as tax reductions and low-interest loans to stimulate shipbuilding in an attempt to boost the economy, leading to excess production capacity.
On January 16, the U.S. Trade Representative’s Office report highlighted that China had artificially lowered costs through subsidies, including prematurely scrapping ships to artificially boost demand, damaging global competitiveness.
An important aspect to note is that both reorganizations of the “South Ship” and “North Ship” coincided with scandals of high-ranking officials and personnel turmoil.
In June 2018, Sun Bo, CEO of China State Shipbuilding, was taken down on charges of bribery and abuse of power. The Central Discipline Commission of the Chinese Communist Party’s announcement stated that he was “disloyal and dishonest.”
On September 10, 2018, Jin Tao, former head of the 712th Research Institute and deputy head of the 704th Research Institute under China State Shipbuilding Corporation, was investigated.
In August 2019, Hu Wenming, former chairman of China State Shipbuilding and the former chief designer of the Shandong aircraft carrier, was dismissed. Two months later, South Ship and North Ship merged to form China Shipbuilding Group. In May 2020, Hu Wenming was investigated.
During the recent second reorganization of the “South Ship” and “North Ship,” senior management within China Shipbuilding Group faced upheavals.
In September 2024, under the leadership of China Shipbuilding Group, China Shipbuilding and China State Shipbuilding disclosed their merger plan. In the same year in December, senior management in China Shipbuilding Group changed, with Xu Peng appointed as the chairman of the group. The whereabouts of the former chairman, Wen Gang, were unknown. The deputy party secretary of the company, Du Gang, had also been absent from public appearances for an extended period.
After stepping down, the predecessor of Wen Gang, Lei Fanpei, took up a new position as the Executive Vice Director of the Office of the Central Military-Civilian Integration Development Committee of the Chinese Communist Party in August 2022. Since the end of last year, he has been absent from important meetings.
Due to the secret nature of handling high-ranking officials in recent years, these missing officials are believed by the public to have been taken down.
Previously, in June 2024, Li Zhaokun, chairman of China Shipbuilding Group’s financial limited company, was investigated. Sources indicated that the case against Li Zhaokun was primarily for accepting bribes from shipbuilding suppliers, who reported him after being paid off.
Shen Mingshi told Dajiyuan that the initial division of South Ship and North Ship by China in the past was to create competition, and if the benefits of exporting were good, two companies could be maintained. The current reorganization may be to avoid wasting resources. However, there may also be considerations for undisclosed reasons.
“For example, due to the severe downturn in the Chinese economy and the government’s shortage of funds, a reduction in ship orders, a potential decline in future orders, and poor quality ships sold to the domestic military, such as the delays in the aircraft carrier taking service, all compounded by the discovery of serious corruption issues among key personnel,” Shen Mingshi said.
On September 26, 2024, The Wall Street Journal, citing U.S. officials, reported that a Chinese nuclear-powered attack submarine sank in the waters of Wuhan earlier that spring, with the authorities vigorously suppressing news of the incident. Some senior U.S. defense officials believe this incident is related to long-term corruption issues in China’s defense industry.
Shen Mingshi argued that the incident of the nuclear-powered submarine sinking before being tested might have been caused by technical inadequacy or a decline in material quality due to corruption.
He further stated that in the current system environment, power struggles, frequent changes in the leadership of enterprises, unstable personnel, financial difficulties, and insufficient funds for research and development due to rampant corruption are common. The shipbuilding industry is prone to corrupt practices such as shoddy workmanship, profiteering through price differentials, and the so-called ‘slapping officials,’ where just a touch on the head commands the construction of very large vessels that ultimately turn out to be of extremely poor quality.