China's private shipyards face hard times

The mainland's leading private shipyards are gasping while watching their smaller rivals collapse one after another in an industry where state firms are increasingly raising the stakes.

Five shipyards have filed for bankruptcy this year, as the shipping market continues its prolonged downturn. Despite the bleak weather marked with falling orders, record low prices and tight credit, state and private players are feeling it differently.

"The environment for private companies has never been supportive, but it has taken a turn for the worse recently," said Simon Liang, the chairman of Jiangsu-based Sinopacific Shipbuilding Group, one of the best non-state shipbuilders in the country.

China rose to become the world's top shipbuilding nation during the last trade boom, surpassing Japan and South Korea by exported tonnage. The triumph came at the expense of relentless, and often inferior, capacity expansion, especially in the private sector.

As trade growth ebbed, the industry has been identified by the government as one of the most oversupplied, earning notoriety along with the steel, cement and electrolytic aluminium sectors.

As capacity unwinds, private players are bearing the brunt of the pain. Additional bank lending is all but impossible even for leading private firms with a sound track record.