Ship­builder plans to in­te­grate civil­ian, mil­i­tary busi­nesses

State-owned CSIC says com­pe­ti­tion in the in­dus­try will re­main fierce

China Daily (Canada) - - LIFE - By ZHONGNAN zhongnan@chi­

State-owned China Ship­build­ing In­dus­try Corp, one of the coun­try’s two ma­jor ship­build­ing con­glom­er­ates and the pri­mary con­trac­tor forChina’s naval force, will fo­cus on 10 ar­eas to in­te­grate its civil­ian and mil­i­tary busi­nesses over the next five years, the com­pany’s pres­i­dent said onWed­nes­day.

Sun Bo said CSIC will fo­cus on off­shore en­gi­neer­ing prod­ucts, power, elec­tronic in­for­ma­tion and in­tel­li­gent equip­ment, me­chan­i­cal and elec­tri­cal equip­ment, un­der­wa­ter de­fense, new energy, new­ma­te­rial and en­vi­ron­men­tal pro­tec­tion prod­ucts, health­care and mod­ern ser­vices.

In the long term, Sun said, the group will fo­cus on devel­op­ing com­mer­cial prod­ucts such as equip­ment needed for off­shore oil ex­plo­ration, stor­age bat­ter­ies, law-en­force­ment ves­sels, very large crude car­ri­ers and su­per­sized con­tainer ships to fur­ther di­ver­sify and ad­just its pil­lar prod­ucts.

With a work­force of about 150,000 em­ploy­ees, CSIC op­er­ates more than 50 in­dus­trial sub­sidiaries and 30 research in­sti­tutes, in­clud­ing Dalian Ship­build­ing In­dus­try Co, Qing­dao Bei­hai Ship­build­ingHeavy In­dus­tryCo Ltd and China Ship Research and Devel­op­ment Acad­emy. It has ex­ported var­i­ous types of ves­sels to more than 70 coun­tries.

China State Ship­build­ing Corp, the other State-owned con­glom­er­ate, also has more than 50 sub­sidiaries and research in­sti­tutes.

While the prof­itabil­ity of many Chi­nese ship­yards was squeezed by low tech­ni­cal con­tent, cum­ber­some fi­nanc­ing sit­u­a­tion and blind ex­pan­sion, CSIC de­voted more of its re­sources to high-end ves­sels and non-marine prod­ucts over the past half decade. In 2015, the group had sales rev­enues of 226.08 bil­lion ($34.82 bil­lion), up 12.1 per­cent on a yearon-year ba­sis.

Last month, the com­pany signed a con­tract for four 400,000 dead­weight-ton VLCCs with ICBC Fi­nan­cial Leas­ing Co, China’s largest fi­nan­cial leas­ing com­pany, to jointly en­sure China’s energy se­cu­rity.

Sun said the com­pe­ti­tion in the ship­build­ing busi­ness will be fierce, es­pe­cially at a time when the whole in­dus­try is suf­fer­ing from fall­ing de­mand.

Over­ca­pac­ity isan­oth­er­prob­lem. More than 30 ma­jor largescale ship­yards went bank­rupt over the past two years, ac­cord­ing to the Beijing-based China As­so­ci­a­tion of the Na­tional Ship­build­ing In­dus­try.

“China has ex­cess ca­pac­ity in build­ing con­ven­tional ships, but not in com­plex and high value-added ships,” Sun said. “Un­der such cir­cum­stances, di­ver­si­fy­ing busi­ness fo­cus and ad­just­ing prod­uct struc­ture cer­tainly are key el­e­ments.”

Ea­ger to main­tain the coun­try’scom­pet­i­tive edge, the gov­ern­ment also en­cour­ages do­mes­tic ship­yards to de­velop ves­sels in ar­eas such as se­cu­rity, sci­ence and research and en­gi­neer­ing.

To main­tain a healthy cash flow, CSIC es­tab­lished four fi­nan­cial com­pa­nies in­clud­ing CSIC Cap­i­tal Co Ltd and in­jected more cash into CSIC Fi­nance Co Ltd last year. It also set up an in­dus­trial fund with an ini­tial cap­i­tal of 10 bil­lion yuan to fur­ther as­sist its busi­ness op­er­a­tion.

The pro­por­tion of CSIC’s non-marine prod­ucts now ex­ceeds its to­tal busi­ness op­er­a­tion by more than 55 per­cent.

“Ify­oulook at the glob­al­mar­ket for ships, you­cansee de­clin­ing signs in the low-end ship mar­ket ev­ery­where,” said Bao Zhangjing, di­rec­tor of the Beijing-based China Ship­build­ing In­dus­try Research Cen­ter.

“Ca­pa­ble ship­yards have al­ready shifted their core busi­ness to mar­itime en­gi­neer­ing and other fast-grow­ing busi­nesses such as new ma­te­ri­als, me­chan­i­cal and elec­tri­cal equip­ment, be­cause, apart from higher prof­its, there is also less com­pe­ti­tion as not many ship­builders are able to pro­duce th­ese so­phis­ti­cated prod­ucts,” said Bao.

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