China’s Shipbuilding Merger Masks Cracks Beneath the Surface

Aug 20, 2025 - 09:53

Updated: 9 months ago

China’s Shipbuilding Merger Masks Cracks Beneath the Surface

News Analysis

China is once again consolidating its state-run shipbuilding industry—this time by folding together two giants that had already been merged once before: China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Company (CSIC).

The move signals Beijing’s determination to retain dominance at sea, said experts, but it also exposes the mounting pressures threatening that position, from the Trump administration’s trade policy to corruption scandals and weakening global demand.

Earlier this month, CSSC began absorbing its counterpart, CSIC, in a stock swap that will see the latter delisted from the Shanghai Stock Exchange. According to the Chinese state-controlled news outlet 21st Century Business Herald, the merger will create the world’s largest shipbuilding enterprise, with a backlog exceeding 54 million tons worth of orders—about 15 percent of the global total.

The timing of this latest restructuring comes not only as President Donald Trump, in his second term, pushes to revive America’s own shipbuilding sector, but also as China’s once-commanding position in the global market shows signs of slipping.

Washington’s Countermove

In April, the Trump administration announced that ships built or operated by Chinese firms would soon face steep new port fees in the United States. The port fees were designed to pressure global shipping companies to turn away from Chinese yards. Buyers who order from American shipbuilders will be exempt.

Later in the month, the Trump administration eased the proposed port fees after pressure from U.S. shippers and port operators.

Nevertheless, the proposal appears to have shifted the market. South Korea’s share of new ship orders jumped from 17 percent last year to 25 percent in the first half of this year, according to a July report by the Export-Import Bank of Korea. Meanwhile, China’s share dropped from 72 percent to 52 percent, reported the Baltic and International Maritime Council. Industry tracker Clarksons Research found that Chinese shipyards saw a 68 percent plunge in new contracts over the same period.

On top of that, Seoul is doubling down. Under a new U.S.-Korea trade agreement, South Korean companies pledged $350 billion in U.S. investments, with $150 billion earmarked for shipbuilding.

Japan, once a global leader, is also trying to regain ground. Yukito Higaki, president of Japan’s largest shipyard, said at a press conference that Japan’s shipping industry aims to double its market share by 2030, to 20 percent.

“The merger of China’s two shipbuilding giants reflects a shifting global balance,” said Su Tzu-yun, a defense researcher at Taiwan’s Institute for National Defense and Security Research, to The Epoch Times.

He noted that the United States has been stitching together partnerships with South Korea, Japan, and Taiwan to diversify both naval construction and repair capacity.

Corruption Beneath the Surface

The two companies’ consolidation is also unfolding against a backdrop of corruption scandals and leadership turmoil inside China’s defense industry.

In recent years, senior executives have vanished, been demoted, or fallen under investigation. Sun Bo, former general manager of CSIC, was fired in 2018 for bribery and later arrested. Hu Wenming, a former chairman who once oversaw the building of China’s first domestically produced aircraft carrier, was dismissed in 2019 and later arrested in 2021.

More recently, in 2024, the head of CSSC’s finance arm was accused of taking bribes from suppliers, according to Chinese state media Xinhua. The group’s top leadership has repeatedly shifted, with at least two chairmen disappearing from public view in the past two years.

Analysts say graft is endemic in the sector, often showing up as corner-cutting, shoddy materials, and inflated contracts.

“Corruption is baked into the Chinese Communist Party’s system,” said Shen Ming-shih, another defense researcher from Taiwan’s Institute for National Defense and Security Research, to The Epoch Times. “It’s why you see frequent quality problems even in vessels meant for its own navy.”

Those problems are not abstract. Last year, a Chinese nuclear-powered submarine sank in a shipyard near Wuhan, said U.S. officials who attributed the mishap to corruption-driven lapses in quality and safety.

Overcapacity Meets Weak Demand

At home, China’s shipbuilding boom masks deeper weaknesses. Despite video clips circulating on Chinese social media of idle barges along the Yangtze River, Chinese shipyards report that their order books are full through 2026. The reason is largely due to state subsidies and cheap loans that fuel overcapacity.

The U.S. Trade Representative warned earlier this year that Beijing is artificially inflating demand by retiring ships early and dumping low-cost tonnage into the market, which are practices that distort global competition.

With China’s economy slowing and exports under strain, the long-term outlook is uncertain.

“Trump wants to restore American industry, but until U.S. shipyards can scale up, Washington is leaning on South Korea and Japan,” Shen said. “That leaves China with much less demand as global cargo shipping declines.”

A Strategic Struggle

Shipbuilding is more than an industry for Beijing. It is central to China’s naval ambitions and influence over global trade routes, but the new CSSC-CSIC merger reveals how fragile that dominance may be.

For all the headlines about its massive production capacity, China’s shipbuilding sector faces shrinking demand, rising competition, and the drag of corruption from within.

As Su put it, “Behind the cooperation of China’s two shipbuilding firms is the transformation of the global shipbuilding landscape.”

Ning Haizhong and Luo Ya contributed to this report.