Economy

China’s Maritime Domination: Investing in America’s Shipyards to Challenge China

China’s overwhelming dominance in the global shipbuilding industry presents a critical threat to the United States, not only economically but also in terms of national security. This is a calculated strategy by Beijing to control the seas, leverage global trade, and expand military capabilities. As tensions with China grow, particularly over Taiwan and other geopolitical hotspots, the U.S. must urgently address its shipbuilding shortcomings to ensure strategic and economic resilience.

China’s Shipbuilding Supremacy: The Numbers Paint a Stark Picture

In 2023, China’s shipbuilding capacity dwarfed that of the United States. China delivered 689 large commercial ships and 30 warships for its People’s Liberation Army Navy (PLAN). Meanwhile, the U.S. produced no large commercial ships and only nine naval vessels. China’s share of the $150 billion global shipbuilding market exceeded 50%, while the U.S. languished at just 1%. As former U.S. Navy Secretary Carlos Del Toro noted, “One of China’s shipyards has more capacity than all of the American ones combined.”

China’s strategy is multifaceted. Its shipyards build both commercial and military vessels, enabling the country to sustain its maritime industry while expanding its navy rapidly. This dual-purpose capability gives China a significant edge in both economic and military competition. The numbers are stark: China’s shipbuilding capacity is over 200 times larger than the United States’. This dominance stems from decades of deliberate state investment, subsidies, and unfair practices such as intellectual property theft and forced technology transfer.

A Dying Industry in the U.S.

The decline of the U.S. shipbuilding industry has been decades in the making. Once a global leader, America’s shipyards have been crippled by deindustrialization, labor shortages, and a lack of modernization. The result is an industry unable to meet both commercial and military demands, leaving the U.S. vulnerable to supply chain disruptions and geopolitical threats.

Currently, only a few shipbuilders sustain the U.S. Navy’s needs. Huntington Ingalls Industries and General Dynamics lead the charge, producing aircraft carriers, submarines, and destroyers. Smaller players like Austal USA and Fincantieri Marinette Marine contribute to auxiliary and smaller combatant vessels. However, these companies are already operating at capacity, with little ability to scale up quickly in response to surging demand.

China’s Unfair Practices: A Rigged Game

China’s dominance isn’t a result of fair competition. Its shipbuilding sector is heavily subsidized by the state, allowing Chinese companies to offer ships at prices far below market rates. Additionally, Chinese workers earn a fraction of their Western counterparts, with entry-level mariners making as little as $8,000 annually. These artificially low costs flood the market with cheap ships, pushing out competitors.

Intellectual property theft and forced technology transfers further tilt the playing field. By acquiring advanced Western designs and technology, China accelerates its shipbuilding capabilities while eroding the competitiveness of American firms. This systematic exploitation has left U.S. shipbuilders struggling to compete on both cost and innovation.

Strategic Implications for U.S. Security

China’s shipbuilding dominance extends beyond economics to national security. Its ability to produce warships at a staggering pace means the PLAN is rapidly expanding its reach, particularly in the Indo-Pacific. By controlling shipping lanes and key ports, China positions itself to disrupt global trade and military logistics in the event of a conflict.

The U.S. Navy’s reliance on a few shipyards for high-tech warships limits its capacity to scale quickly during a crisis. Additionally, America’s maritime logistics—critical for resupplying troops and maintaining supply chains—is woefully inadequate for sustained conflict. These vulnerabilities underscore the urgent need for the U.S. to rebuild its shipbuilding base.

Potential Solutions: Investing in America’s Shipbuilding Future

To counter China’s dominance, the U.S. must act decisively. Efforts like the proposed Ships for America Act aim to revitalize the U.S. shipbuilding industry by increasing the construction of American cargo ships, bolstering military sealift capacity, and expanding the maritime workforce. However, rebuilding this industry requires a comprehensive approach:

  1. Expand Capacity with Public and Private Shipbuilders Major shipbuilders like Huntington Ingalls Industries and General Dynamics Electric Boat are already at capacity. Commercial shipyards such as Philly Shipyard, VT Halter Marine, and Keppel AmFELS must be tapped to fill gaps. These companies have the infrastructure to produce commercial vessels and could transition to auxiliary or lower-complexity naval ships with the right investments.
  2. Incentivize Private Sector Investment Publicly traded companies such as Huntington Ingalls Industries (HII) and General Dynamics (GD) represent opportunities for private investment in the U.S. shipbuilding resurgence. Investors might also consider companies like Austal Limited (parent of Austal USA, traded on the ASX) and Fincantieri (parent of Fincantieri Marinette Marine, traded on the Milan Stock Exchange).
  3. Modernize Infrastructure Many U.S. shipyards are outdated and inefficient compared to their Chinese counterparts. Government grants and loans should prioritize modernization efforts, allowing shipyards to adopt advanced manufacturing techniques and expand production capacity.
  4. Address Workforce Shortages The U.S. maritime industry faces a shortage of skilled labor. Apprenticeship programs, wage subsidies, and partnerships with technical schools can help rebuild the workforce needed to meet rising demand.
  5. Enforce Fair Trade Practices Tariffs and penalties on Chinese-built ships may level the playing field, but they are not enough. The U.S. must work with allies to challenge China’s unfair practices at the World Trade Organization and enforce stricter intellectual property protections.

The Investment Opportunity

As the U.S. rebuilds its shipbuilding industry, companies involved in this resurgence represent promising investment opportunities. Key players include:

  • Huntington Ingalls Industries (HII): Leading builder of aircraft carriers and submarines.
  • General Dynamics (GD): Key producer of submarines and destroyers.
  • Philly Shipyard: A commercial shipbuilder transitioning to federal projects like the National Security Multi-Mission Vessel (NSMV).
  • Austal Limited (ASX: ASB): A growing player in auxiliary and combat vessel construction.
  • Fincantieri (Milan: FCT): Parent company of Fincantieri Marinette Marine, which is building Constellation-class frigates for the U.S. Navy.

China’s dominance in shipbuilding is not just an economic challenge; it is a strategic threat to the United States. By rebuilding its shipbuilding industry, the U.S. can safeguard its economic interests, strengthen national security, and regain its position as a maritime leader.

Look for the political will to appear in the Trump Administration to rebuild the shipbuilding industry, it will likely happen, but there is a possibility of a pivot to some other strategy.  As always, we do not give financial advice, we only convey knowledge and ideas.

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