Report: Beijing Gives Approval for CSSC-CSIC Merger
On Friday, persistent rumors of a merger between the Chinese government's two shipbuilding giants gained new strength. Bloomberg reports that China's state council has given its preliminary approval for China Shipbuilding Industry Corp. (CSSC) to rejoin China State Shipbuilding Corp. (CSSC), two decades after it split the two apart in a broad shakeup of China's state-owned enterprises. The Chinese government, CSSC and CSIC have all declined to officially confirm the news.
CSSC spun off CSIC in 1999, handing the new entity its yards in northern China. CSIC's assets include Dalian Shipyard, Bohai Shipyard, Wuchang Shipyard and a wide variety of associated suppliers, manufacturers and research labs. It had annual sales in the range of $50 billion last year. CSSC owns Shanghai Waigaoquiao Shipyard, one of the nation's most advanced shipbuilders, along with Jiangnan Shipyard and Hudong-Zhonghua Shipbuilding. It took in about $30 billion in sales last year.
By annual sales, either company would be bigger than any of the South Korean Big Three shipbuilders, which are just now regaining traction after a run of loss-making years. Together, CSIC and CSSC would have more sales volume than all of their South Korean competitors combined, Bloomberg noted, and a bigger order backlog than any other shipbuilding conglomerate in the world.
Earlier this week, CSSC appointed a new chairman, Lei Fanpei, who is an aerospace engineer and an alternate member of the Chinese Communist Party's Central Committee. Shanghai Daily reported that his appointment could be a signal that a re-merger with CSIC was in the works.
CSSC faces financial difficulties due to the effects of the shipbuilding downturn. It announced in January that it was working with major state-owned investors to recapitalize four of its yards and improve its balance sheet - another sign that it could be preparing for a merger, according to market analysts.