• China’s massive shipbuilding industry is key to its military’s naval modernization.
• Dual commercial and military shipyards and China’s national ambitions are major strengths.
• But military corruption and future maintenance issues raise questions about long-term sustainability.

China’s shipbuilding industry is at the core of its efforts to modernize its navy, producing new warships at astonishing speeds.

But despite its shipbuilding strengths, which include a robust commercial sector and a variety of yards across the country, China’s vast shipbuilding empire is not without its challenges, such as corruption and many still unanswered questions about future needs and the capability and capacity of Chinese yards to meet them.

China’s huge shipbuilding empire is no hidden secret. It is a monstrous industry with over 230 times the capacity of the US per recent estimates from the Office of Naval Intelligence. China also represents about 50% of the total global shipbuilding capacity.

A huge shipbuilding giant

The Department of Defense has long identified shipbuilding as key to Beijing’s naval buildup, which has occurred at a rapid pace and directly fueled the modernization of China’s naval force in concert with efforts to build a better military overall. That effort is likely best demonstrated by the types of vessels being made and the speed at which they’re being built.

China’s new aircraft carrier, the Fujian, for example, features a major capability jump over its predecessors, featuring an electromagnetic catapult launch system for efficiently launching heavier, more capable aircraft. Though the carrier resembles the older conventional Kitty Hawk-class vessels of the US Navy, the catapult system is technologically similar to the Navy’s first-in-class USS Gerald R. Ford carrier.

Other Chinese surface combatants, like the Type 055 destroyer, Type 054 frigates, and newer amphibious assault ships are also noteworthy. The first Yulan-class assault ship, known as the Type 076, also stands out. Once it’s completed, it’ll be the largest amphibious assault ship in the world. It may also serve a very unique purpose as well, possibly as a drone carrier.

By 2030, the Pentagon expects the People’s Liberation Army Navy, already the largest naval force in the world, to possess a battle force of 435 ships with a notable increase in “major surface combatants.”

China’s shipbuilding strengths are also demonstrated in its flexibility. The crown jewel of its industry is Changxing Island, where China is overhauling its recently expanded Jiangnan Shipyard and combining it with the Hudong-Zhonghua Shipyard. While moving Hudong-Zhonghua, China has still been turning out ships.

Brian Hart, a fellow with the China Power Project at the Center for Strategic and International Studies, told BI it’s a massive and impressive undertaking. “I don’t really think any other country has the scale and resources to just pick up and essentially move such a massive industrial base,” he said.

China is driving its military toward the goal of becoming world-class force, and there is a clear recognition that a strong navy is key to achieving that end. This important national ambition gives tremendous support to China’s shipbuilding empire.

“China is a very, very different type of player” when it comes to military shipbuilding, Matthew Funaoile, a senior fellow with the China Power Project at CSIS, explained to Business Insider.

Another strength is that many of China’s shipyards, including its four most significant ones, are dual-purpose, meaning they’re used for both commercial and military vessels. Warships and civilian vessels are being built at the facilities, sometimes at the same time and using the same equipment.

Those four yards — Dalian in northeastern China, Huangpu Wenchong near Hong Kong, and the Jiangnan and Hudong-Zhonghua yards near Shanghai — are all operated by subsidiaries of the state-owned China State Shipbuilding Corporation pumping out various military vessels while also raking in record profits in the commercial shipbuilding sector that help to fuel their other operations.

Being a giant has its challenges

A problem, though, is that as China sails full-steam ahead with its military’s modernization, it has also faced corruption scandals within its ranks, as well as within the defense industrial base.

“When you kind of pursue your military modernization at full pace, there’s going to be a corresponding increase in corruption,” Funaoile said.

Within the past year or so, the People’s Liberation Army and supporting industry have seen noticeable turmoil. More than a dozen senior generals and military-industrial complex executives have been removed from their positions since last summer, including two defense ministers.

Beijing has remained largely tight-lipped about these dismissals, providing only limited details, but the investigations into corruption have shaken up Chinese leadership and raised questions over how ready the PLA is as a combat-ready, modernized fighting force.

Questions about corruption were brought up by US officials in the wake of reports that a Chinese submarine sank pier-side at a shipyard in Wuhan earlier this year, highlighting the risks of accidents amid China’s rapid naval build-up.

“The incident raises deeper questions about the PLA’s internal accountability and oversight of China’s defense industry — which has long been plagued by corruption,” a senior defense official told BI this week.

Over the years, there have been signs of extensive corruption documented within the shipbuilding industry, as well as other parts of China’s defense industry. Top officials have been removed abruptly and even arrested.

Corruption breeds incompetence or, worse, security risks. China’s leadership has made countering corruption a prominent agenda item, but resolving these issues will be affected by how deep they run.

That’s not the only challenge, though. Rapid growth and modernization in the Chinese navy raise important questions about how it will eventually balance building and maintaining vessels. It’s one thing to build a new fleet. It’s a completely different thing to sustain it.

There could be tradeoffs for China in the future, especially considering its commercial sector, Funaoile said. “We haven’t hit that point yet, but it is something that may come up as vessels are put into sea and start taking wear and tear.”

Sustainment and maintenance costs are no small obstacle, and they are something with which the US and other powerful navies grapple.

“Perhaps the PLAN can run its fleet more economically than the US Navy would,” Mike Sweeney, a non-resident fellow at Defense Priorities, wrote in April. “But operational budgets can only be reduced so far.”

“Fuel and the provision of other essential supplies to an active blue-water fleet are unavoidable expenditures,” Sweeney added. “Maintenance is another area where outlays will inevitably climb, the more consistently China deploys its fleet in global waters.”

That’s an area where a more experienced navy, such as the US, may maintain a leg-up, not just because of experience, but also because of its larger logistical capacity to keep ships fueled, supplied, and maintained. But even for the US Navy and the industries that support it, that process is far from perfect and often proves difficult.