World: The End of the Chinese Boom?
Shipbuilding looks set for heavy cuts as Premier signals end of 'Zombies'
It has been expected over the years, but now the meteoric rise of China's heavy industries, including shipbuilding, now seems to be teetering on the brink of one of the most ruthless periods of rationalisation ever seen.
China's Premier has already said that the 'Zombie firms' are to be felled and in a recent speech he underlined this with policy aimed at China's own internal growth, as opposed to export led profiting.
Many observers saw this coming years ago: bloated heavily inefficient state owned enterprises set up to overwhelm foreign competitors and consume the world's wealth, now being pared back and indeed turned against. Much as Margaret Thatcher turned against the steel, shipbuilding and coal industries of the eighties, so to does China seem poised to raise rhetoric against its own 'dirty' industries now and already ministers have indicated that around five to six millions workers will be laid off over the coming years.
A burgeoning middle class, spending heavily on foreign luxury items and a tired working class points to the inevitable exhaustion of the more labour intensive steel, coal and engineering workers it would appear. Already many state owned shipbuilders (and some private) have gone to the wall, and with a slow-down in world trade, there is an oversupply of ships of all kinds on the seas today, fueled mainly by China's explosion of activity in the past two decades, it seems likely that as a matter of market supply and demand AND state policies, many more will follow.
The downturn could be massive. The CEO of Golden Ocean, one of the biggest bulk shipping firms, has said that there has never been a worse time for shipping 'since the Vikings'. This is before China truly starts to hack away at its own core heavy industries.
Shipbuilding has suffered more than most from a combination of oversupply, credit problems, and concentrating too much on producing simple ships at cheap prices. Now the end has come for many of the producers of bulk vessels and reports tell of half finished ships all over yards in the country.
China rose quickly, but it would seem, too quickly, and a crash seems now inevitable.