May 29, 2025: Any future American war with China will depend on commercial shipping to carry supplies to the combat zone and raw materials to United States manufacturers. In wartime, it is typical for shipping to be withdrawn from use by countries not involved in the war because of the risk that their ships will be targeted by one or another of the combatants.

Currently, American errors in shipbuilding policy and assumptions about the availability of foreign shipping in wartime mean that the diminished American merchant fleet will have to do the impossible and try to move war material with too few ships.

At the same time, China now has the largest merchant fleet in the world. While China is the second largest economy, after the United States, the Chinese continue to build most merchant ships. Worse, Chinese firms operate these ships. In earlier times, a country, like Britain a century ago or the United States after World War II, would manufacture ships and sell them to various shipping companies or countries. In wartime, enemy shipping would be seized by both sides and used by their new owners. This is the Chinese vulnerability. If China goes to war, its vast shipping fleet operating around the world would shrink as the enemies of China seized those ships for their own use.

China may not be as efficient at managing shipping as other countries, but it is good enough to manage only China-owned or operated ships. The Chinese government aided and encouraged local shipbuilders to become more productive and competitive. A major milestone occurred in 2019 when China’s two major shipbuilders, CSSC and CSIC, merged to create the largest shipbuilder in the world. A decade earlier, recessions and continued competition from rivals South Korea and Japan forced the change. The new company, China Shipbuilding Group or CSG, as well as the two it merged from, are all state-owned. The merger is a return to the situation in 1999 when CSSC and CSIC were created from the then single state-owned shipbuilding operation. This was meant to encourage competition, and it worked.

Chinese shipbuilders, mainly the now reunited two large firms, account for most shipbuilding in China and have sought to overtake their main rival, South Korea, as the largest shipbuilder in the world in all categories. There are several ways to measure shipbuilder output, and South Korea was the champion in most of them. Japan was once in first place, but now is third. South Korea and China have been close competitors for first place since 2012, and to that end, the two largest South Korean shipbuilders also merged in 2019.

South Korea has been making a comeback in shipbuilding, an industry it led until 2012 when it was briefly overtaken by China. By 2018, South Korean firms surpassed China in new orders. This was mainly because South Korean shipbuilders are seen as leaders in the construction of more complex transports, in particular, Liquid Natural Gas or LNG vessels, which transport natural gas refrigerated enough to turn natural gas to a more compact liquid. Demand for LNG ships is driven by the growing output of natural gas in the United States and Canada because of improved extraction methods, mainly fracking. The North American natural gas market is saturated, and American and Canadian producers can afford to lower prices enough to export large quantities via LNG carriers. Europe is eager for LNG because the current major supplier via pipeline is Russia, and Russia is at war and more of a danger than a reliable economic partner. Another unique form of ship construction that South Korea excels at is offshore oil exploration and drilling vessels and structures. The offshore platforms are built in shipyards and are mobile, via towing at slow speeds from one work site to another.

All major shipbuilders had to deal with a sharp decline in orders since the global economic recession began in 2008, which was the year with the highest number of orders ever. The business has never recovered; all major shipbuilders had to cut prices, and many ships were built at a loss or for no profit just to keep the yards operating. One way China helped its shipyards cope was by increasing orders for warships. This was going to happen anyway, but the government gave the navy all it wanted and then some. This resulted in 2019 being a record year for warship construction with 28 surface warships launched, including ten destroyers, 16 corvettes, and two large amphibious ships. While warships are more complex ships to build, commercial ships still accounted for over 95 percent of the work at the new China Shipbuilding Group. Now, China is also the largest producer of non-nuclear warships.

China continues to lead the global shipbuilding industry in new orders. This is mainly because of their lower prices and gradual improvements in quality. Chinese prices are not as low as they used to be because a growing labor shortage has driven wages up. In the long term, China can learn to compete on quality, but that is not something that can be achieved quickly, like cutting prices. When it comes to moving LNG or offshore drilling for oil, buyers tend to go with the most reliable shipbuilders, even if it costs more. Moreover, Chinese shipyards have some unique financing and management problems that may get a lot worse because of problems in the Chinese banking industry.

In 2012, South Korea lost its decade-long battle with China to retain its lead in shipbuilding. Because of a five-year-long depression in the world shipping market, South Korean ship exports fell 30 percent in 2012, to $37.8 billion. China, helped by government subsidies, saw ship exports fall only 10.3 percent, leaving China with $39.2 billion in export sales. The Chinese government has also been giving its shipbuilders lots of new orders for warships, which made its yards more profitable and better able to beat South Korea on price. The Chinese government also provides its shipbuilders with more loans, allowing the builders to offer better credit terms to customers. South Korea was still ahead of China in total orders for ships, but that lead was being lost, and in 2011 South Korea was barely ahead of China. Since 2012, China and South Korea have been competing for overall first place, but so far, South Korea has the edge in quality and innovation, and the recent Chinese merger was meant to deal with that by combining nearly all Chinese research and development of new ship designs in one company.

China has been helping its shipyards since the late 1990s, and that has enabled Chinese shipbuilders to gradually catch up to South Korea and Japan. In 2009, sooner than anyone expected, China surpassed South Korea as the world's largest shipbuilder in terms of tonnage. In late 2009, Chinese yards had orders for 54.96 million CGT of ships, compared to 53.63 million CGT for South Korea. Thus, China had 34.7 percent of the world market. In 2000, South Korea previously took the lead from Japan in 2000 having the largest share of the world shipbuilding market.

The terms used to measure commercial ship size can be confusing, but they serve a purpose. CGT stands for Compensated Gross Tons. This is a new standard for measuring shipyard effort. Gross tons have long been used as a measure of the volume within a ship. CGT expands on this by adding adjustments to the complexity of the ship design. Thus, a chemical tanker would end up with a value four times that of a container ship. China is producing far more ships, in terms of tonnage of steel and internal volume, than South Korea, mainly because a much larger portion of Chinese ships are simpler designs. South Korea has, over the years, pioneered the design and construction of more complex ships like chemical and LNG carriers.

Note that deadweight tons measure the actual weight of everything carried in the ship, including supplies, miscellaneous equipment, fuel, and even crew, expressed in metric tons. As a rule, for every 1,500 deadweight tons, a cargo ship could carry about 1,775 measurement tons. Each measurement ton represents one cubic meter of cargo. Warship tonnage is measured differently, in terms of displacement tons. Each cubic meter or 35 cubic feet of seawater displaced by the vessel is a displacement ton. As that volume of seawater weighs approximately one long ton, displacement gives a rough indication of the actual weight of the vessel.

China has invested a lot of money and effort into expanding its merchant shipbuilding industry so as to improve its warship building capability. In 2006 China produced about a quarter of the world's merchant shipping, while South Korea was in the first place, producing about a third. Currently China is in first place followed by South Korea, Japan, Germany, Italy and the United States.

The big thing holding China back in the warship-building area has been the shortage of skilled workers. The Americans have a similar problem. Too many young men go to college and end up unemployed while better paying jobs in the shipbuilding industry go unfilled.

China encouraged merchant shipbuilding, which created experienced shipbuilders ready to learn the more complex tasks needed to build warships. In most cases, merchant ships are larger than warships and much less complex. For example, a common type of merchant ship is the Very Large Crude Carrier or VLCC of 300,000 deadweight tons. This is the largest size tanker that can use the Straits of Malacca to carry oil from the Persian Gulf to East Asia. These ships haul over two million barrels/290,000 tons of oil per trip. These ships are larger than the biggest American aircraft carriers, such as the Nimitz class, which has 110,000 tons of displacement and is nearly 354 meters long.

The major difference between merchant vessels and warships is the equipment they have. Merchant ships are quite basic and plain. A 300,000 DWT VLCC is about the same size as a Nimitz-class carrier but costs $130 million to build versus over $4 billion for the carrier. It costs more to run a carrier for one year than the VLCC costs to build. Part of that has to do with crew size, with the carrier having a hundred sailors for every one sailor needed to run the tanker. A VLCC is highly automated, and the crew size is usually under fifty sailors and officers.

By building all those merchant vessels, China has acquired the ability to cheaply build basic warship hulls. It has big problems in creating the complex electronics, mechanical systems, and weapons needed to make a warship work. China is making progress there as well, but not nearly as much as it has in the shipbuilding area.

China became a major force in commercial shipping partly because it became more difficult for South Korean builders to expand. There were more restrictions on land use in South Korea, in addition to higher labor costs. South Korean builders, seeing that they could not match the expansion of Chinese shipyards, expended more effort on building more complex and expensive ships. Japan was following a similar path when it lost the lead to South Korea a decade before China grabbed it. China also gained more market share by offering generous loan terms to foreign buyers of Chinese ships and cheap loans for their own shipbuilders.

The one vulnerability China has not yet come up with a solution for is how to prevent the Americans from seizing many of these Chinese-built, owned, and operated ships during wartime.