China to aid ailing shipbuilders with more subsidies

BEIJING Mon Dec 9, 2013 11:15am EST

A view of the Rongsheng Heavy Industries shipyard is seen in Nantong, Jiangsu province December 4, 2013. REUTERS/Aly Song

A view of the Rongsheng Heavy Industries shipyard is seen in Nantong, Jiangsu province December 4, 2013.

Credit: Reuters/Aly Song

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BEIJING (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 (1101.HK), 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)

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Comments (2)
MikeBarnett wrote:
The article correctly points out that shippers receive subsidies “to replace old models with new and greener ones.” In late 2011, at the Durban Climate Change Conference, China presented a $1.7 trillion, 22 point, 5 year ($340 billion per year) plan to address pollution. China always said that it would fight pollution when it could afford to do so without harming the economic security of its citizens. This move to replace older polluting commercial ships with newer vessels that produce less pollution is another step in China’s plan that will have the additional benefit of keeping its economy improving. All efforts to reduce pollution will require work, jobs, paychecks, and, in some cases, profits for companies that address the problems. In addition, China has had problems with pollution in its eastern coastal provinces. Reducing pollution from commercial vessels that take and/or deliver cargos to and from its eastern seaports will reduce some of the pollution in its eastern coastal provinces.

Dec 09, 2013 1:04pm EST  --  Report as abuse
MikeBarnett wrote:
One other point. This effort to replace old ships with new ships will make China’s merchant marine more modern and more competitive with other countries, so China will transport more goods, and make more profits from that transport, than other nations in the future.

Dec 09, 2013 1:17pm EST  --  Report as abuse
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