A company bills 10,000 million euros in a year when it makes investments of 200 million. Half of the business for that same company comes from public sector orders, including the central government, provinces, and local authorities. All the capital expenditures, falling under favorable signing and depreciation terms, have been financed by a public bank. This is exactly what is happening with China’s shipbuilding industry, as recently denounced by an unprecedented coalition of American unions that called for a formal investigation into Chinese practices and a broad set of countermeasures. The shipyards in China are largely controlled by the government of Xi Jinping; the same holds true for shipowners, supporting firms, forwarders, and maritime technology companies. Orders originate in Beijing or are directed by the state, and they are financed through China’s extensive network of credit institutions. The result is that 90 percent of current global contracts sit under Chinese control or influence.
The complaint has been filed with the Office of the United States Trade Representative, the federal government’s lead agency on trade matters, and has earned the endorsement of its chair, Katherine Tai. The initiative comes from five unions representing roughly 5.35 million workers across the country: United Steelworkers, International Association of Machinists, International Brotherhood of Boilermakers, International Brotherhood of Electrical Workers, and the Metal Trades Department. They submitted a highly detailed 137-page report, accompanied by a compilation of independent studies and analyses that together exceed 4,600 pages. The Department of Commerce now has a 45-day window to determine whether to open a formal inquiry. Such an inquiry could pave the way for future moves in the European Union, where China’s expansion has already left European shipyards without a substantial share of merchant fleet orders, and now threatens to erode Europe’s dominance in cruise ships as well.
One key finding brought forward in the complaint, supported by research from the Center for Strategic and International Studies, concerns the government injections that benefited China’s shipyards and shipowners during the period 2010 to 2018. This support amounts to roughly 15 billion dollars in government financing annually, according to CSIS. By comparison, it equals about twenty times the value of the Galician naval order book at the end of 2023, which stood at 700 million euros. A further example shows that between 2006 and 2016, half of China’s naval industry revenue was in renminbi, the country’s official currency. This level of external support is a form of subsidy that European industry leaders have also flagged but with limited success in curbing its impact. Reinhard Luken, general manager of the German shipbuilding and marine technology association, has publicly warned that Western powers have been sounding the alarm for two decades about a wave of state-backed financing that has been persistent under aid from shipowners and banks, and even supported by certain tax authorities in Germany.