China’s Naval Shipbuilding Sets Sail
China has parlayed the world’s second-largest economy and second-largest defense budget into the world’s largest ongoing comprehensive naval buildup, which has already yielded the world’s second-largest navy. All that is only part of an extraordinary maritime transformation—modern history’s sole example of a land power becoming a hybrid land-sea power on a sustained basis. Underwriting this transition are a vast network of ports, shipping lines and financial systems, and increasingly advanced ships. It also raises the rare prospect of a top-tier non-Western sea power in peacetime, one of the few instances to occur since the Ming Dynasty developed cutting-edge nautical technologies and briefly projected unrivaled power across the Indian Ocean six centuries ago. These factors raise a critical question for our age: Where is China headed at sea, and to what end?
Ships are the physical embodiment of naval strategy and an essential element through which a nation achieves the ends of maritime strategy. China has three major sea forces: the navy, coast guard and maritime militia. Of them, the navy is China’s primary force beyond the near seas (such as the Yellow, East China and South China Seas) as well as the critical measure of its sophistication in shipbuilding. Yet, unlike every other major shipbuilding power, China does not reveal how many warships of each class it intends to build.
The strategic goals and guidance of the party, state and People’s Liberation Army determine Chinese naval shipbuilding choices. To rationalize ship and weapons-system design with naval strategy, two main research organizations perform analysis: the strategically focused Naval Research Institute and the technically focused Naval Armament Research Institute. This is part of a larger Weapons and Armament Development Strategy drafted by the General Armament Department and approved by the Central Military Commission. It helps inform China’s more than twenty-six thousand national standards and more than eleven thousand military standards, with the naval subset compiled in a two-thousand-plus-page volume titled “General Specifications for Naval Ships.”
For now at least, open sources do not deeply illuminate the specifics of this planning process, thereby constraining the potential for deductive analysis. Fortunately, extensive production by China’s shipbuilding industry (SBI) already offers a bonanza for inductive analysis, particularly through the interdisciplinary approach pioneered by the Naval War College’s China Maritime Studies Institute. As the editor for the sixth volume in CMSI’s conference book series, “Studies in Chinese Maritime Development,” I assembled a diverse group of some of the world’s leading specialists and had them address the following questions:
1. What are China’s prospects for success in key areas of naval shipbuilding?
2. What are the likely results for China’s navy?
3. What are the larger implications, particularly for the U.S. Navy (USN)?
The resulting book, Chinese Naval Shipbuilding, is divided into five sections. Following an introduction, it first surveys the foundation and resources available. Christopher Carlson and Jack Bianchi begin by tracing how evolving ways of war and consequent missions have shaped the design, development, outfitting and deployment of People’s Liberation Army Navy (PLAN) ships. Morgan Clemens and Ian Easton next consider the role and requirements assigned China’s SBI by its civilian and military masters, and offer a case study on amphibious vessel construction. Gabe Collins and Eric Anderson round out the section by documenting the growing amount and diversity of financial resources for China’s military SBI, including the channels through which China’s military shipbuilders are tapping into domestic and international capital markets. Given today’s commercial ship market doldrums and weak demand for new vessels, Chinese shipbuilders have mounting incentives to seek government contracts to furnish vessels for China’s three sea forces, which promise larger profit margins in a captive home market. Thus motivated, Chinese shipbuilders may well wrap themselves in the flag and lobby decisionmakers to increase spending on force structure.
The next three sections cover specialized SBI subsets: infrastructure, design and remaining shortcomings. In the second section, on shipyard infrastructure, Sue Hall and Audrye Wong track the evolution and output of Chinese vessel construction facilities. They explain key commercial SBI dynamics, metrics and global production trends, including the cyclical waves characterizing the past decade’s boom and recent retrenchment. Alex Pape and Tate Nurkin offer a detailed inventory of China’s naval fleet from the early 2000s projected through 2030, with in-depth coverage of funding, all major classes of warships and auxiliaries, shipyard-specific construction forecasts suggesting wholesale fleet modernization and renewal, and the resulting order of battle. Sean O’Connor and Jordan Wilson expertly analyze satellite imagery of key yards. They focus on three leading facilities: Jiangnan, Dalian and Huludao—China’s exclusive production site for nuclear-powered vessels. Daniel Alderman and Rush Doshi conclude the section with a nuanced explanation of China’s hybrid CMI diffusion and absorption approach.
The third section addresses naval architecture and design. It reportedly takes one hundred thousand to two hundred thousand man-hours of work for a Chinese company to design a ship for the first time. In doing so, it draws on established standards. These can be quite numerous: one Chinese source states that modern destroyers contain six hundred thousand to seven hundred thousand components. To probe such processes, Mark Metcalf examines four major categories of standards: national, military, industry and those issued by the China Classification Society. Roughly equivalent to U.S. military standards, they offer key insights into factors influencing the development and production of PLAN vessels. Kevin Pollpeter and Mark Stokes subsequently survey China’s seven-stage research, development and acquisition process for warships—the life cycle by which it conceives, obtains, uses and disposes of them. As part of “integrated innovation” that relies heavily on the incorporation of foreign technology, China emphasizes a hybrid approach involving integration, digestion, absorption and re-innovation. Julian Snelder next draws on personal investment experience and extensive interviews to illuminate the civilian industrial underpinnings of Chinese shipbuilding, including a detailed evaluation of ship values. State-owned enterprises are poised to continue leading China’s commercial and military production efforts, as part of a larger “doubling down” by Xi Jinping’s China: striving simultaneously to strengthen centralized oversight and enhance market-oriented performance.
The fourth section weighs remaining challenges for China’s SBI, of which several stand out. Leigh Ann Ragland-Luce and John Costello probe shipboard electronics. Their case study of the Type 054A Jiangkai II frigate’s electronics suite suggests that interdependent Chinese efforts at advanced “informatization” (the incorporation and networking of information technology) suffer from limited innovation and integration. Jonathan Ray, Robert Forte and I then survey the state of power and propulsion for Chinese conventional and nuclear vessels. Particularly in the nuclear realm, PLAN vessels remain underpowered, and lacking in power density and acoustic quieting. Developing, acquiring and mastering the relevant technology (e.g., aspects of precision manufacturing) will likely prove difficult, expensive and protracted—although Russian assistance could accelerate progress significantly. Finally, Andrew Scobell, Michael McMahon, Cortez Cooper and Arthur Chan examine aircraft carrier development—another area with wide-ranging implications in which Chinese progress will likely remain incremental.
The final section considers alternative futures and offers conclusions and takeaways. Charged with envisioning maximal outcomes for China’s navy by 2030, James Fanell and Scott Cheney-Peters project the realization of a “China Dream” at sea involving a much larger, more capable navy with a far greater mission set, including a credible undersea deterrent, multiple carrier strike groups and a continuous network of warships operating in distant waters. In a companion chapter, Michael McDevitt considers a medium trajectory for China’s navy. Even under conservative assumptions, China will field the world’s second-largest blue-water navy by 2020—the U.S. Office of Naval Intelligence projects a total fleet of 313–342 hulls. The PLAN’s long-range power projection force subset will increasingly resemble a smaller version of the PLAN’s only comprehensive superior, the USN.
Paul Scharre and Tyler Jost next consider technologies with the potential to transform the development and operation of warships. Based on the core trends of increasing transparency, connectivity and machine intelligence, they identify four “wild card” competitions whose outcomes portend major disruption: hiding versus finding, understanding versus confusion, network resilience versus degradation, and hitting versus intercepting. China’s SBI will impact all four competitions. One technology of interest is 3-D printing, which the PLAN has already used to produce a replacement engine bearing for a warship operating in the Gulf of Aden. The extent to which a given technology will prove truly revolutionary, or simply evolutionary, hinges in part on the extent to which it is married with operational concepts governing its use to achieve transformational approaches. Predicting the character of naval warfare decades hence may seem hopeless, but when a navy builds a new ship, it is doing just that with a multimillion—or multibillion-dollar—bet, particularly in terms of four essential factors: size, weight, power and cooling, all driving costs directly yet difficult to modify later. Thus, it makes sense to hedge one’s bets with open architecture emphasizing software over payloads over platforms.
Ronald O’Rourke concludes with specific implications and policy recommendations. For over a decade, China’s military-maritime modernization has affected requirements for USN capabilities, particularly by renewing focus on high-end warfare far from shore against adversaries that can substantially challenge American sea control. Ongoing U.S. naval debates center on strategy, force architecture and budgets to meet this and other contingencies.
The volume’s numerous exhibits include maps of Chinese shipyards, and graphics depicting the evolution of Chinese strategy and warship capabilities as well as vessel production, organization, processes and outputs. Additionally, the volume has extensive order of battle charts, including selected force structure comparisons with other major navies.
Both in the volume and the conference on which it is based, contributors reached general consensus concerning the following: China has achieved the most rapid aggregate SBI growth in modern history, with monumental but uneven results. Through a process of “imitative innovation,” the country has leapfrogged key development steps, saving time and resources. By 2020, the PLAN will be unambiguously the world’s second-largest blue-water navy. Moreover, if current trends continue, by 2030 China may assemble a combat fleet that in overall order of battle (hardware only) is quantitatively, and perhaps even qualitatively, in the same league as the USN. In my personal opinion, even the perception that China was on track to achieve such parity would have grave consequences for America’s standing and influence across the Asia-Pacific and around the world.
To be sure, China faces substantial difficulties in fielding the largest, most sophisticated surface combatants and submarines. They all involve complex systems-of-systems, such as propulsion and aspects of aviation, in which China’s preferred second-mover piecemeal integration of foreign and domestic technologies cannot offer a “good enough” result. Such ongoing limitations, as well as a lack of overseas bases, mean that far from its shores China will continue to extend radiating layers of influence and reach but not—anytime soon—control. Even by 2030, the PLAN will remain in the early stages of increasing operational proficiency and ability to engage in high-intensity opposed operations in distant waters. Moreover, in coming years, China also faces mounting costs of maintaining its burgeoning fleet. China also confronts macro uncertainties, most importantly in the form of downside risks to its future economic growth. Meanwhile, it seems destined to confront a rival competitive strategy in the form of a USN buildup under the Trump administration.
But regardless of these challenges, in coordination with China’s other sea forces (including the coast guard and maritime militia) and services, the PLAN is increasingly capable of contesting sea control within widening-range rings surrounding the near seas and their immediate approaches. China’s SBI has already produced a fleet of several hundred (currently in the low 300s; 303 per the Pentagon’s 2016 report) increasingly advanced warships capable of “flooding the zone” along the contested East Asian littoral. When several hundred ships each from China’s coast guard and its most advanced maritime militia units are factored in, Beijing’s numerical preponderance for the “home game” scenarios it cares about most becomes formidable indeed. And that does not even include the land-based “anti-navy” that backstops them. In this regard, while China continues a major ship buildout with tremendous implications, it is already able to pose a formidable military-maritime challenge to the regional interests and security of the United States and its East Asian allies and partners. Despite its ongoing limitations further afield, China has already proven itself capable of precisely the sort of maritime development that rightly concerns them most.
Central to this Chinese counter-intervention challenge is the PLAN’s overmatching of the USN in key aspects of missile loadouts. Left unaddressed, this disparity is likely to worsen as China deploys greater quantities of missiles with greater ranges than those systems potentially employed by the USN against them. By 2020, China is expected to have:
• quantitative parity or better in surface-to-air missiles and antiship cruise missiles (ASCMs)
• parity in missile launch cells
• and quantitative inferiority only in multi-mission land-attack cruise missiles, which are less essential to prevailing worst-case deterrence by denial or “war at sea” scenarios.
As with the platforms on which they are based, these Chinese weapons are concentrated in the near seas, while their American counterparts are dispersed globally. To make matters worse, the next-generation long-range ASCMs on which U.S. naval superiority hinges are still “paper missiles” not yet fielded on USN surface combatants. Moreover, these new ASCMs—the Long-Range Antiship Missile and vertical launch system–compatible Naval Strike Missile variant—may not be effectively targetable under contested counter-intervention conditions.
In accordance with CMSI’s scholarly approach, participants in both the conference and the volume engaged in a robust exchange of competing ideas. Key questions debated included the following:
• Can China’s shipbuilding organizations fully and directly support its maritime strategy? China’s sprawling SBI has been charged with comprehensive transformation through restructuring to address overcapacity, underutilization, redundancies, inefficiencies and inadequate interaction. China’s two leading state shipbuilders, China Shipbuilding Industry Corporation (CSIC) and China State Shipbuilding Corporation (CSSC), are currently divided along functional lines and do not compete directly. Reflective of Xi’s broader promotion of supra-organizations and mega-conglomerates to achieve integration in other heavy and/or strategic industries, such as rail, nuclear and aviation, CSIC and CSSC are now slated for a merger, although there has been no official announcement. Meanwhile, major shipyards are being consolidated from several hundred to a few dozen, named on a State Council of the People’s Republic of China “whitelist.”
• Will CSIC and CSSC actually merge in substantive fashion? Contributors debated the extent to which these objectives would be accomplished in practice. Skeptics emphasized that the low-hanging fruit had already been harvested. Regardless, the two conglomerates are indeed rationalizing their respective internal operations to eliminate overlap and competition.
• Can China’s centralized approach succeed? Certainly this is Xi’s goal, a microcosm of the guiding principles that he and the Chinese Communist Party embrace. As one contributor noted, Chinese specialists seek to emulate American success by concentrating resources, with at least one declaring, “We need our own Lockheed Martins!” China’s actual prospects for reducing organizational barriers such as “stovepiping”—while increasing competition, technological diffusion and absorption, and innovation—remain hotly debated.
• Are China’s standards effective, and used fully and reliably? There was some disagreement on this issue, with those more focused on Chinese commercial shipbuilding tending to be more pessimistic. Notably, pushback has emerged within China’s own civilian industry, where some stakeholders decry recent promotion of military-compatible standards as a costly burden.
• Is China’s oft-cited civil-military integration (CMI) approach effective? There was widespread skepticism among industry experts about the extent and efficacy of CMI. “Not a good mix operationally—colocation and coproduction are challenging if not counterproductive” was one of the more pointed critiques. Potential civil-military incompatibilities cited include culture, security, standards, design, engineering, propulsion, construction and timescales. Nevertheless, dual-use construction is undeniably emphasized in many authoritative Chinese industry policies and publications, as well as, most recently, in the form of a new central commission for integrated military and civilian development headed by Xi himself. There is certainly some intermingling in practice, with the greatest potential apparently in shipyard infrastructure.
• Finally, to what extent can China’s military SBI transcend the limitations hampering its civilian SBI? Some of the abovementioned debates stemmed in part from differences in perspective between contributors more familiar with one or the other of these sectors. In considering their inputs holistically, it emerged that China’s military sector generally enjoys better funding, infrastructure and human capital in the form of advanced personnel, such as engineers with long-term experience as opposed to rapid turnover. Hu Wenming, CSSC’s CEO, deems “military products” to be his enterprise’s “number one priority.” As multiple contributors deeply familiar with Chinese naval capabilities emphasized, the PLAN is “not receiving junk” from China’s shipbuilding industry but rather increasingly sophisticated, capable vessels. Its growing satisfaction with them is indicated in part by longer production runs of fewer series. A more specific question remains: at what cost, and with what remaining limitations on high-end capabilities, is China producing warships?
What is clear already from CMSI’s inductive approach is that China’s naval SBI has laid a formidable foundation. To the extent that China can reduce, or—as it would prefer—overcome, the limitations mentioned in this section, its navy will grow even stronger.
Tyranny of Distance and Time
For all China’s progress and potential, the contributors identified formidable long-range challenges for Chinese sea power development. To begin with, sea power requires tremendous propulsive and electrical generation power. Propulsion determines how fast and far a ship can go; overall power determines what it can do. With water 829 times denser than air, there is a cubic-or-greater power-to-speed relationship: to go three times faster, a ship needs at least twenty-seven times more power. Increasing capabilities require greater payloads, as well as more capable supporting systems with greater processing power and sensor load. These factors expand ship size requirements, which in turn increase both costs and propulsion demands.
The PLAN’s transition to a “Two Ocean” (primarily Western Pacific and Indian Ocean) navy is dispersing its fleet over greater distances, making it more difficult to support and requiring enhanced logistics and facilities access. Contributors anticipated concerted Chinese efforts to progress in:
• long endurance propulsion, especially nuclear power, the ultimate “gold standard”
• area air defenses for surface combatants and emerging carrier groups
• land-attack and strike warfare, including from deck aviation assets
• antisubmarine warfare
• acoustic quieting for submarines, to help them both survive being targeted in deeper blue-water environments and search more effectively without limitation by self-generated noise
• and broad-coverage command; control; communications; computers; intelligence, surveillance and reconnaissance.
China has started to pursue all these objectives, but it will take years before it fully accomplishes them.
The Cost of Chinese Sea Power
The imperative to understand and address the cost of Chinese and American sea power is one of the most complex and critical issues that our project has raised. A conference panelist with significant naval shipyard management experience explained that when maintenance, repair and overhaul are factored in, “You buy the boat three times.” China has been engaged in a rapid ship buildout akin to previous Soviet efforts. Like Moscow decades earlier, Beijing appears not to have prepared adequate supporting and maintenance infrastructure for in-service vessels, including sufficient numbers of capable dry docks and technicians. Yet the PLAN’s high operational tempo, as seen in its eight years and counting in the Gulf of Aden, is accelerating the process of its ships wearing out. Absent significant additional preparations, China faces a major reckoning in five to ten years when the mid-life maintenance bill for its new warships starts coming due. By then, programs initiated with alacrity in flush fiscal times will have entered a costlier phase, yet may command less robust discretionary funding amid growing national policy tradeoffs.
Overshadowing all this is China’s economic future, which appears increasingly subject to an S-curved slowdown in which pollution, resource depletion, corruption, an aging population, chronic diseases and mounting internal security spending compound to impose mounting costs. Collectively, these headwinds are likely to increasingly constrain the funds potentially available for military hardware procurement. This could make it hard for Beijing to sustain its present spate of capital-intensive warship procurement and operation.
Funding challenges have long bedeviled other nations developing and maintaining advanced navies. While countries tend to spend a constant percentage of their economic resources on their navies over time, a landmark study by Philip Pugh documents that the cost of individual warships and weapons—driven primarily by growing weight, power density and sophistication—has historically increased at 9 percent annually, far faster than inflation. At 2 percent inflation, this entails costs doubling each decade. Similarly, a RAND study calculates the cost growth rate for USN vessels over the past half century at 7–11 percent annually.
Navies can slow cost growth by downshifting some missions to smaller, simpler platforms. In an unusually dramatic example of such economizing, as well as to increase room for maneuver and deception, China is greatly expanding its coast guard to shoulder previous PLAN assignments, and—uniquely—is equipping elite maritime militia units assigned in part to promote sovereignty claims with larger, better vessels. Ultimately, however, navies typically sacrifice ship numbers to contain costs.
One alternative, rarely pursued, is to boost naval spending significantly. In this regard, American exceptionalism appears resurgent. By the unforgiving ratio of naval cost-to-economic-growth, among major world navies, India is entering a sweet spot; China is exiting a sweet spot; Japan, the UK, France and Russia have not enjoyed a sweet spot in years; and the United States is now attempting to reengineer a sweet spot with major additional investment in military shipbuilding.
The fact that China may be nearing the end of a particularly good run gives no grounds for complacency in American naval shipbuilding. First, there is a lag effect. Warships purchased competitively yesterday or today—price-capped in part by China’s relatively stable business and vendor base—can benefit Beijing for decades. Of course, as noted above, China’s large and growing new fleet will eventually face rapidly mounting maintenance and repair costs.
Second, to the extent that China loses its sweet spot, it could take a page from the Trump administration’s book and attempt to significantly increase prioritization and funding for naval shipbuilding. In theory, it could also attempt to regain a sweet spot of sorts by radically rethinking its land- and sea-based force structure and weapons systems. Such disruptive innovation is challenging, but that is exactly what China began to do in the late 1990s with megaprojects for “anti-navy” weapons such as antiship ballistic missiles (ASBMs), when it faced new threats yet had far less to invest in addressing them.
Third, there is a potentially revolutionary prospect: what if China can really “get its ships together” in its preferred manner by parlaying exceptional cost-competitiveness into exceptional quantity at sufficient quality? China is poised to remain the world’s foremost commercial shipbuilder by volume, and is working up the value chain in both civil and military domains. In doing so, it draws inspiration from multiple leading shipbuilders: in the commercial sphere, Japan and South Korea; in the military sphere, the United States, western Europe and Russia. China’s naval modernization has been greatly facilitated by an unparalleled organizational structure for collecting and disseminating technology, and integrating it into production processes at an industrial scale.
In part through this fast follower approach—building on a massive economy—China has or is developing formidable capabilities and capacities in all shipbuilding-relevant areas (including steel, aluminum, structural and dynamic engineering, electronics, electrical power systems, engines—albeit with European licensing and Russian and Ukrainian assistance, and civilian nuclear technologies). Moreover, in entering industries, China tends to destroy pricing and introduce deflation. While potentially counterproductive regarding profitability and wealth in commercial shipbuilding itself, such “bending the curve” might allow Beijing to continue to afford a massive fleet buildout in ways that earlier shipbuilding powers never managed. If a Chinese juggernaut can truly succeed in changing the structural cost of sea power and naval warfare in a way that places the United States on the wrong end of a costly capabilities competition, the ramifications for the USN will be serious indeed.
In my view, these dynamics and uncertainties make President Trump’s nominee Philip Bilden particularly well-qualified to help manage a USN shipbuilding renaissance as the seventy-sixth secretary of the Navy. The planned fleet revitalization will occur in a complex economic, fiscal, political and diplomatic environment. Moreover, Trump values commercial expertise, and almost certainly will expect a ruthless focus on the financial “bottom line” management of an extensive (and expensive) naval rebuilding. This demands an individual who is accountable and excels under pressure, possesses deep executive management experience and understands the Asia-Pacific region. Mr. Bilden exemplifies these qualities, with a decade of experience as a military intelligence officer and two decades of successfully building companies and consistently achieving strong returns for demanding investors as a Hong Kong–based fund manager. Mr. Bilden’s strong support for USN institutions and deep engagement with the intellectual foundations underpinning them demonstrates his commitment to, and understanding of, the service in which his two sons serve. He now stands ready to help develop and direct American sea power where it is most needed—a fundamentals-focused fleet renewal that is long overdue.
Implications for U.S. Naval Policy and Shipbuilding
For China today, the sea represents its primary direction of opportunities and threats. Chinese interests and influence are expanding outward, meeting new forces and frictions. Accordingly, the country is determined to become both a leading “maritime power” and a leading “shipbuilding power.” These interrelated goals are clearly prioritized at the highest levels of China’s leadership. Beijing is well on course to achieve these objectives overall, but specific uncertainties remain.
Three key issues to watch over the next decade regarding Chinese military shipbuilding are: (1) Will naval hardware acquisition remain a priority in China? (2) If so, can China overcome the increasing economic headwinds to maintain robust military spending sufficient to sustain a continuing naval buildup? And (3) how effectively will China confront rising production, operations and maintenance costs as many core PLAN vessels approach the middle of their anticipated service lives and new vessels become ever more sophisticated?
Regardless of the ultimate answers to those questions, an historically unprecedented shipbuilding surge has already helped make China “great again,” as a “re-risen” major power with formidable regional military capabilities. Close to home, China enjoys powerful synergies and advantages regarding the sovereignty claims that it pursues along its contested maritime periphery—increasingly in defiance of regional stability and international laws and norms, and supported by precision-strike systems designed to render American intervention risky and challenge American sea control.
In addition to closing the missile deployment and capability gap identified in our volume, I therefore believe that it is now imperative for policymakers to ensure that the United States has enough well-equipped Navy vessels available for use in key operational areas, particularly throughout maritime East Asia. Deploying sufficient numbers would maximize peacetime presence and influence, while deterring a worst-case contingency by demonstrating capacity for overwhelming kinetic operations therein. Lacking sufficient numbers, by contrast, would imperil regional stability and security—and with them, vital U.S. interests. Absent an adequate American naval shipbuilding response, Chinese naval shipbuilding will continue to generate disruptive waves that threaten to swamp the status quo in the vital but vulnerable Asia-Pacific region.
Dr. Andrew S. Erickson is professor of Strategy in the Naval War College’s China Maritime Studies Institute, and an Associate in Research at Harvard University’s John King Fairbank Center for Chinese Studies. He is series editor of the Naval Institute Press book series “Studies in Chinese Maritime Development,” of which Chinese Naval Shipbuilding is the sixth volume. The views expressed here are his alone.
Image: People’s Republic of China People’s Liberation Army Navy Hengshui at Rim of the Pacific 2016. DVIDSHUB/Public domain