China could owe America one trillion dollars

Interesting story that not many people know:

http://chinadailymail.com/2012/05/29/china-could-owe-america-one-trillion-dollars/

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US Navy to deploy warship to Singapore

From South China Morning Post. These new Littoral Combat Ships (LCS) will make a huge difference in the West Philippine Sea.

The first in a new class of US Navy combat ships will be sent to Singapore next year for a 10-month deployment, an official said on Thursday, as the US moves to expand its Asia-Pacific presence.

“The USS Freedom will deploy to Singapore for 10 months in spring next year,” Navy Lieutenant Katie Cerezo said.

The ship belongs to a new class of “littoral combat ships” a€“ smaller, surface vessels intended for operations close to shore and able to deploy quickly to crises that are part of a US strategy focusing on the Asia-Pacific.

The Navy said its force would eventually be equipped with 55 warships of this type, four of which could be deployed in Singapore.

The ships are meant to be deployed on a rotational basis and not based in Singapore, where the US military already operates a small post that assists in logistics and exercises for forces in Southeast Asia.

China’s defence ministry has been scornful over increased American military activity in the region, saying it is proof of a “Cold War mentality” from Washington.

The United States is also expected to step up deployments to the Philippines and Thailand as part of its Asia-Pacific strategy.

Posted in China, Maritime & Navy, News and Opinion | 2 Comments

Quote of the day 63

“Life may not be the party we hoped for, but while we are here we might as well dance.”

– Anonymous

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China’s shipyards on the brink

From South China Morning Post:

Welder Zhang fires up his blowtorch and looks up at the towering, 8,800-tonne oil tanker that is likely to be his last job at Qiligang Shipbuilding.

Barring a miracle, the 50-year-old will soon join the thousands who have fallen victim to the end of the country’s maritime boom and the long-awaited consolidation of its more than 1,600 shipbuilding firms.

Four years into one of the worst downturns to afflict the global shipping industry, hundreds of small to medium-sized shipyards are teetering on the brink of bankruptcy as foreign orders dwindle and lenders cut credit.

“The building of this ship is almost done, and we don’t expect to have any new jobs soon,” said Zhang, who asked to be identified by one name. “We used to work 30 days a month, but now we work only 10 to 20 days because not many ships are being built. Many workers have moved on to other jobs.”

Qiligang Shipbuilding is one of several troubled firms in Zhejiang province, the world’s largest manufacturing base for small to medium-sized dry docks.

According to media reports, about 80 per cent of the shipyards in the province have either suspended production or are operating at half their capacity.

“The grass is growing high in many yards that have closed due to a lack of orders,” said Zhang Shouguo, the secretary general of China Shipowners’ Association. “This is just the beginning of the woes for shipbuilders and the worst has yet to come.”

To survive and keep some of the sector’s 400,000 workers employed, shipyards must turn to less lucrative businesses such as leasing vessels, real estate or, in the worst case, tearing apart the ships they once used to build, industry experts say.

“Shipbuilding is a very cyclical industry and those who can maintain strength, complete structural restructuring and transform will be a major force after the recovery,” said Zhang Yao, a spokesman for Singapore-listed Yangzijiang Shipbuilding, one of the largest shipbuilders in China.

“For others without flexibility to deal with the market changes, dormancy may be their best choice. Eventually more than 30 per cent of existing shipbuilders will disappear.”

Zhang’s forecast is relatively optimistic compared with the view of other industry officials. The head of the government’s China State Shipbuilding, Tan Zuojun, said in February he believed 50 per cent of the shipyards would go bankrupt in the next two to three years.

The shipping industry has yet to recover from being mauled by the 2008 global financial crisis, which triggered what the International Monetary Fund called the “Great Trade Collapse”.

The Baltic Dry Index, the benchmark for the freight market and an indicator of global economic activity, plummeted more than 94 per cent in 2008 from a record high 11,793 points. This week, it was trading above 1,100.

During a maritime recession, shipbuilding is usually the first and hardest hit sector as global shipowners delay or cancel orders for new vessels to save capital reserves.

But in China, the world’s biggest shipbuilder by volume, government intervention helped the industry defy the norm. Debt-laden shipyards that otherwise should have gone bust were allowed to stay afloat, thanks to easy credit, which stemmed from government efforts to bolster foreign exchange reserves to protect the economy from the crisis.

Lending to the overall shipping industry shot up more than 500 per cent to almost US$4 billion in 2008.

“When Chinese shipyards have new orders, the buyers must bring foreign currency into China since the shipping contracts are in US dollars,” said Lam Pak-ho, a Hong Kong-based senior manager at Bank of China.

The huge expansion in Chinese shipyards, which hold about half the world’s new ship orders, helped create a glut of low-tech vessels that has kept freight rates low and prolonged the agony for shipowners across the globe.

As these foreign firm struggle, orders have declined and financing has become problematic, prompting Beijing to turn its back on what has now become an unprofitable business.

Credit has also dried up as the government tries to cool the economy, falling more than 87 per cent from 2008 to about US$501 million last year.

New orders dived 52 per cent last year to 36.22 million deadweight tonnes, the China Association of National Shipbuilding Industry said. This year, new orders are down about 40 per cent in the January-February period.

Only the largest shipyards such as China Shipbuilding Industry, China Rongsheng Heavy Industries and Yangzijiang Shipbuilding are expected to survive this round of consolidation.

In the government’s five-year economic forecast, the country’s 10 largest shipbuilders are expected to hold at least 70 per cent of the domestic market by the end of 2015, compared with less than 50 per cent in 2010.

A short drive from Qiligang Shipbuilding’s yard, two unfinished tankers stand in the once bustling dry dock owned by struggling Dongfang Shipbuilding.

The shipyard, which had employed more than 600 workers just over a year ago, could become another scrapyard if the company fails to find a more profitable way to survive. China is one of the world’s leading ship recycling nations.

“At the end of this year, you could see many shipyards turn into scrapyards,” said Venkatesh Narayanaswamy, a former chairman of Dongfang Shipbuilding. “This would be the worst-case scenario, because the profit margins are much lower.”

Posted in China, Economy, Ship Building | Tagged , | 1 Comment

Mythbusters

A very interesting article from SINOSTAND, that busts a few popular myths.

Chart: Comparing historical Chinese and foreign-inflicted deaths

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Quote of the day 62

“If you think it is expensive to hire a professional to do the job, wait until you employ an amateur” – Red Adair

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Charles Darwin

It’s his 203rd birthday today.

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