DALIAN, China -- The two largest shipbuilders in China will merge, forming a commercial and military contractor expected to hold a global market share of nearly one-fifth, after the government on Friday approved their planned union.
The combination of China State Shipbuilding Corp. and China Shipbuilding Industry will create a player on par with the global leader, South Korea's Hyundai Heavy Industries, which itself is merging with domestic peer Daewoo Shipbuilding & Marine Engineering.
No timeline was disclosed for the merger between the two Chinese state-owned enterprises, known respectively as CSSC and CSIC.
Both companies construct bulk carriers, containerships and passenger vessels.
CSSC ranks as the No. 2 shipbuilder worldwide, completing 9.25 million tons last year for an 11.5% share, according to British firm Clarksons Research. Third-place CSIC completed 6.02 million tons, equating to a 7.5% share.
The merger also will improve China's ability to build warships. Both companies build aircraft carriers and other military vessels. China is developing offshore ports and acquiring port operators, under President Xi Jinping's vision of transforming the country into a naval power.
State-led efforts in China and South Korea to merge shipbuilders are creating an oligopoly in the global industry. This puts pressure on Japanese rivals, of which more than 10 are competing in a low-growth business environment.
Chinese and South Korean players also have gone on the offensive in commodity and fuel carriers, an area of specialty for Japanese shipbuilders.
Despite calls for consolidation in the Japanese industry, little has occurred on that front. The last major shift occurred in 2013 when multiple companies, such as JFE Holdings and IHI, merged their shipbuilding businesses to form Japan Marine United.