The Chinese are hankering to gain a foothold in the higher-value cruise vessel building sector.
During a recent visit to Xiamen Shipbuilding Industry in the Fujian province, the company’s management said at a pre-Brics Summit media junket it was looking to expand into the profitable cruise shipbuilding industry.
Brics countries - Brazil, Russia, India, China and South Africa - will meet for its summit in Xiamen, from September 3 to 5.
The company has signed a $220 million (R2.9 billion) contract with Finnish company Viking Line for a new passenger cruise ship on the Finland-Sweden route, with a planned delivery in 2020. The agreement includes an option for another vessel.
The energy-efficient vessel will be 218m in length with a passenger capacity of 2 800.
The lucrative deal has made European shipbuilders nervous. The Chinese government’s “Made in China 2025” programme has earmarked cruise shipbuilding as a major objective to boost its manufacturing industry and to create jobs in its shipyards.
Until now, Europe has dominated the $117bn industry.
According to the Cruise Lines International Association, 26 new ships were last year ordered to the tune of $6.8bn. This year, 25.8 million travellers are expected to holiday on a luxury liner. China’s domestic demand for cruise trips increases 30% per annum.
The country’s shipbuilding industry is expected to play an important role in the success of China’s plans to rejuvenate the old Silk Road, through its One Belt and One Road initiative.
China’s move into the cruise sector comes as global demand for cargo ships has collapsed, shutting many Chinese yards.
The industry is worth a staggering $117bn and has been dominated by Europe. Experts say learning to build cruise ships is not easy, with a web of suppliers needed to furnish items from luxury carpets to swimming pools.
Viking has stipulated that this would be a “collaborative project” and it plans to engage Finnish and other European suppliers and hire Scandinavian architects for the interior design.
The Chinese have imitative innovation tapped. They have an uncanny knack for learning from their competitors, mastering techniques, then manufacturing goods at competitive prices.
Reuters reported that Shanghai Waigaoqiao Shipbuilding yard at the mouth of the Yangtze River is looking for potential deals and that China State Shipbuilding Corporation has brought in European advisers, including Italian shipbuilder Fincantieri, to help learn how to compete in building cruise ships.
Reuters interviewed leaders in the European sector and found that they were rattled. And so they should be. China is already a dominant player in the cargo shipbuilding industry over recent decades.
Two years ago, Southern African Shipyards entered into a memorandum of understanding with China Shipbuilding Trading Company, a subsidiary of China State Shipbuilding Corporation.
The memorandum saw South Africa join forces with one of the largest shipbuilding groups in the world to share experience and expertise, particularly around potential projects which fall under the government’s Operation Phakisa.
The operation is geared to developing South Africa’s maritime economy in marine transport and manufacturing, as well as oil and gas. It includes the expansion of South African port capacity for repair work for oil ships and oil rigs.
At the time, Southern African Shipyards chief executive Prasheen Maharaj said: "China and South Africa are both members of the Brics global alliance and our memorandum is a natural outcome to promote each other’s maritime interests.”
Work in South Africa’s shipyards fluctuates and is dependent on major projects. It would be astute for the local industry to use Sino-African ties to harness the potential in China’s new investment in the cruise ship-building business.
Dr Andrew Erickson, editor of the Naval Institute Press book series Studies in Chinese Maritime Development, told international publication The Diplomat that modern history has never before seen such rapid growth in the shipbuilding industry as China’s. Beijing is one of the world’s largest shipbuilders.
“China’s commercial shipyards have achieved a massive (over)capacity in low-end ships, but remain limited in their ability to produce quality high-end, or high-value, merchant ships.” He said that sea-power development may be flowing away from the Euro-Atlantic shipyards of the West.
China is charting a new course in the maritime sector, one which is set to make waves.
Peters is the live editor of Weekend Argus. She is on a 10-month scholarship with the China Africa Press Centre. Instagram: mels_chinese_takeout.