China to Aid Ailing Shipbuilders with More Subsidies

A view of the Rongsheng Heavy Industries shipyard, China’s largest private shipbuilder, is seen in Nantong, Jiangsu province December 4, 2013. (c) REUTERS/Aly Song

BEIJING, Dec 9 (Reuters) – China is handing out new subsidies for buying ships to help its beleaguered shipbuilders, confounding a government pledge to reduce support for sectors with over-capacity in order to reform the economy.

The central government will set aside “special funds” that give shippers subsidies of 1,500 yuan per gross ton — a unit of measure for the volume of vessels — to replace old models with new and greener ones, a government statement said.

The scheme will run until the end of 2015. The subsidies are only valid for ships scrapped one to 10 years ahead of mandatory retirement dates, the statement said.

The state subsidies are the latest given to Chinese shipbuilders, which are fighting falling demand and excess capacity. It suggests the government is loath to see a big industry that is also a big employer wither.

Yet by extending more aid to a sector foundering on excess investment, Beijing appears to be contradicting a promise to solve the problem of excess capacity by restricting credit and ending state support. China’s cement, steel and solar panel industries are also fighting over-capacity.

Some analysts have said China may find it hard to withdraw support for all sectors and companies with over-capacity, especially if they are also big providers of jobs, such as China Rongsheng Heavy Industries Group, the country’s biggest private ship manufacturer.

Despite state subsidies of up to 1.3 billion yuan a year from 2010 to 2012, Rongsheng is struggling to survive. It reportedly laid off 8,000 workers earlier this year and is appealing for more government aid. Its financial woes have hollowed out Rugao, a town in eastern China and Rongsheng’s manufacturing base.

The new subsidies were first announced on Dec 5 but made public only on Monday on the government website. The statement was made jointly by the Finance Ministry, the Transport Ministry, the Ministry of Industry and Information Technology and the National Development and Reform Commission, a powerful economic planning agency. (Reporting by Koh Gui Qing; Editing by Larry King)