Steaming Ahead, Course Uncertain: China’s Military Shipbuilding Industry

May 19, 2016 Topic: Security Region: Asia Blog Brand: The Buzz Tags: ChinaChinese NavyChinese EconomyMilitaryDefense

Steaming Ahead, Course Uncertain: China’s Military Shipbuilding Industry

China’s maritime transformation is already making waves. Still, however, China’s course and its implications—including at sea—remain highly uncertain...

Programmatic Decision-making: To drive requirements, PLAN leadership integrates the analysis of its two main research entities—the technically focused Naval Armament Research Institute (NARI), and the strategically focused Naval Research Institute (NRI)—to rationalize ship and weapon system design with naval strategy. The increasing diversity of PLAN mission areas (e.g., massive expansion of area air-defense) is having a significant effect on Chinese naval ship design. Increasing capabilities demand increased processing power and sensor load. Greater payloads and supporting systems drive increases in ship size.


Naval Ship Design: New design and production technologies—as previously with CAD/CAM software from Japan and Europe—are being imported into China, adapted, and deployed for military use. Advances in ship design are achieved through “imitative innovation,” an official technology transfer policy based on a process of Introduce/Digest/Absorb/Re-innovate (IDAR). IDAR takes existing technology and adds value to it by making it cheaper, better suited to Chinese needs, or otherwise improving it. Modular construction is expanding for both commercial and military ships. Modularity improves production efficiency—by enabling standard modules to be constructed and stored to better accommodate shipbuilding schedules—and also offsets uncertainties by employing common systems and sub-components.

Military-Civil Disconnect: The greatest variation across China’s uneven but improving SBI stems from its military-civil bifurcation. While subject to the aforementioned inefficiencies, the naval side appears to have by far the best funding, infrastructure, research institutes, designers, and workers. State-owned shipyards on the Ministry of Industry and Information Technology’s favored “white list”—the ones building most of China’s warships—receive not only preferential treatment, but preferential support. The advantages enjoyed by military shipbuilding may be further enhanced as state shipbuilders seek to compensate for recent declines in commercial orders by securing contracts for naval and coast guard ships, the latter of which are being built even more swiftly and numerously. Learning is occurring rapidly. It typically takes 10-20 repeats to double labor efficiency and the PLAN is ordering longer production runs of fewer series, facilitating advancements in shipbuilding knowledge and competence. That said, China’s military shipbuilding industry still faces challenges in subcomponents (especially propulsion/power) and some sensors (e.g., anti-submarine warfare versions). On the commercial side, in marked contrast, many private shipyards risk bankruptcy and closure. The civilian shipbuilding workforce remains undereducated. Worker quality, lower than in South Korea and Japan, remains a major drag on productivity and high-end achievement. With regard to commercial shipbuilding, therefore, China has a massive capacity to build small, less-complex ships and large, non-complex ships, but has demonstrated less capacity to build large, complex ships. However, even the commercial side is improving over time. For instance, partnerships between shipyards and “feeder” technical schools are being created to help improve the workforce’s quality, in part by offering guaranteed jobs for graduates.

Particular Propulsion Weakness: Compared to the United States, China retains particular shipbuilding limitations in propulsion, some electronics, and certain advanced weapons systems. Propulsion is the single biggest shortcoming and is unlikely to progress until China’s precision manufacturing capability improves. Conventional propulsion in submarines is moving toward advanced Lithium-ion batteries, possibly as an alternative to air independent power (AIP) systems. Nuclear propulsion advances—especially in power density and acoustic quieting—remain difficult to ascertain, but a key variable affecting future progress will be the degree of Russian assistance.

Points of Contention:

To be sure, in keeping with CMSI’s rigorous academic approach, the conference produced significant debate. In my personal assessment, the most important areas of disagreement included:

1. Will Chinese state-owned shipyards re-merge in a substantive fashion? CSIC and CSSC were unified until 1999, then divided along geographic and functional lines so as not to compete directly (CSIC has the majority of R&D centers, for instance). Some believe true reintegration will occur—as has been widely reported in Chinese and foreign media—to increase efficiency and available resources and to reach a State Council-mandated reduction in the number of commercial shipyards from several hundred to 60. Those doubting that meaningful merger will occur observed that most unions to date exploit geographical efficiencies and that this “low-hanging fruit” has been thoroughly plucked. They also note that CSIC and CSSC naval yards have already reduced to only 7 major facilities between them.

2. What are China’s prospects for reducing organizational barriers and increasing technological diffusion and absorption? China is responding to organizational and technological impediments by emphasizing integration of commercial and naval shipbuilding processes, which some industry experts believe could improve quality and efficiency. Others maintain that this will actually reduce efficiency and increase challenges because of the fundamentally different natures of naval and commercial shipbuilding.

3. Are Chinese shipbuilding standards effective design and construction tools, given cultural barriers to standardization and regulation? Some highly knowledgeable experts believe that overall they “offer a workable road” to improved future construction. Others believe they are “hopelessly convoluted,” outdated, and probably used selectively. Of note, in China’s space industry it took top-level leadership intervention before program managers actually started to follow standards consistently. Several observers well versed in naval affairs emphasized that whatever the specifics, China is clearly putting sophisticated, capable warships to sea. Developments causing concern for U.S. and regional observers has been accomplished in spite of the limitations on Chinese shipbuilding raised by presenters, primarily those focusing on commercial issues (where Chinese shipbuilding is weaker than on the military side). To the extent that China can reduce or overcome these limitations, its accomplishments will be even greater. Shortly after the CMSI conference, in June 2015, a new joint PLA-China Classification Society (CCS) standard (GJB) levied certain requirements on new construction of commercial ships in support of military mobilization needs. While these requirements are strongly advocated by national security stakeholders, they have reportedly received pushback from ship builders and owners, complicating their implementation

Implications for the U.S. Navy:

CMSI conferences are designed to offer insights and policy recommendations specifically useful to the USN. From my perspective, the conference yielded the following takeaways:

1. Chinese ship-design and -building advances are helping the PLAN to contest sea control in a widening arc of the Western Pacific.

2. Experts generally agreed that by 2020, the PLAN will be the world’s second most powerful navy, with naval assets dedicated to distant waters (“Far Seas”) missions greater in capability than those of the UK, France, Japan, or India. Given the likelihood of continued government investment, cost advantage, and pursuit of integrated innovation, China’s shipbuilding industry appears to be on a trajectory to build a combat fleet that could be, in hardware terms, quantitatively and qualitatively on a par with that of the USN by 2030. Whether it can stay on this trajectory, given downside risks to China’s economy, is another question.

3. Regardless of China’s precise economic future, the PLAN—together with other PLA forces—will be increasingly capable of contesting U.S. sea control within growing range rings extending beyond Beijing’s unresolved island and maritime claims in the Near Seas. Experts generally agreed that by 2020, China is on course to deploy greater quantities of missiles with greater ranges than those systems potentially employed by the USN against them. China is on track to have quantitative parity or better in surface-to-air missiles and anti-ship cruise missiles (ASCMs), parity in missile launch cells, and quantitative inferiority only in multi-mission land-attack cruise missiles. Retention of USN superiority hinges on next-generation long-range ASCMs (the Long-Range Anti-Ship Missile and the vertical launch system-compatible Naval Strike Missile variant)—which are still “paper missiles,” un-fielded on USN surface combatants. Additionally, new U.S. ASCMs may be unable to target effectively under contested anti-access/area-denial conditions. Failing to fill this gap would further imperil U.S. ability to generate and maintain sea control in the Western Pacific.

The Way Forward:

At the CMSI conference and beyond, the aforementioned dimensions of China’s maritime rise have rightly attracted growing attention. Directed by civilian authorities, the U.S. Navy, Marine Corps, and Coast Guard have taken notice. The current U.S. Maritime Strategy, issued in 2015, states: “China’s naval expansion into the Indian and Pacific Oceans presents both opportunities and challenges.” It adds: “The U.S. Sea Services, through our continued forward presence and constructive interaction with Chinese maritime forces, reduce the potential for misunderstanding, discourage aggression, and preserve our commitment to peace and stability in the region.”

Like its predecessors, this conference continued the CMSI tradition of both addressing challenges from, and pursuing opportunities with, China. Increasingly, the U.S. and Chinese navies are meeting at sea and ashore. While the two sides will not always agree, to ensure avoidance of worse outcomes than the current peacetime mix of cooperation and competition, they must always understand each other clearly. It was in that spirit that NWC welcomed PLAN Commander Admiral Wu Shengli to represent his navy for the first time ever at the 21st International Seapower Symposium in September 2014. Admiral Wu is clearly focused on enhancing professional military education for his service. In February 2015, twenty-nine “fast-track” Chinese naval officers participated in a six-day exchange program with USN counterparts, including visits in Newport to NWC, with which I assisted, and the Surface Warfare Officers School. In July 2015, I was honored to accompany a delegation of twelve NWC students and NWC’s deans of international programs and domestic and foreign student programs to reciprocate with visits to the PLAN Headquarters in Beijing and to China’s Naval Command College in Nanjing.