Executive Briefings

As Global Economy Slows, China's Shipyards Becalmed

In another sign of China's economic slowdown, shipyards are now closing and half-finished vessels lie rusting. Prosperity is receding like the tide, and thousands of laborers have lost their jobs.

The hard times are playing out at shipbuilding bases across China, from the northern port of Qingdao to the silt-filled Yangtze River in the central heartlands.

The bellwether industry's troubles have their roots in a shipping boom that started a decade ago. Global investors rushed to finance new vessels needed to haul coal and copper to China's humming factories and to transport finished electronics, toys and other exports out. China went from producing just over 100 vessels in 2002 to more than 1,000 in 2010, according to Worldyards, a Singaporean-based shipping industry research firm.

That over-exuberance resulted in a glut of ships. It's a problem that has worsened as China's economy has decelerated along with that of its major trading partners - Europe and the United States. Fewer customers for Chinese exports and a shrinking appetite at home for raw materials mean fewer vessels needed to carry that cargo.

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The hard times are playing out at shipbuilding bases across China, from the northern port of Qingdao to the silt-filled Yangtze River in the central heartlands.

The bellwether industry's troubles have their roots in a shipping boom that started a decade ago. Global investors rushed to finance new vessels needed to haul coal and copper to China's humming factories and to transport finished electronics, toys and other exports out. China went from producing just over 100 vessels in 2002 to more than 1,000 in 2010, according to Worldyards, a Singaporean-based shipping industry research firm.

That over-exuberance resulted in a glut of ships. It's a problem that has worsened as China's economy has decelerated along with that of its major trading partners - Europe and the United States. Fewer customers for Chinese exports and a shrinking appetite at home for raw materials mean fewer vessels needed to carry that cargo.

Read Full Article