Murky Waters

China has emerged as the undisputed leader of the global shipbuilding industry. Over 300 shipyards dot China’s seaboard, churning out more than half of the world’s commercial vessels each year. These shipyards build the merchant ships that power global trade, but many are also charged with building China’s rapidly expanding navy.  

Foreign companies have poured billions of dollars of revenue and transferred key technologies into these dual-use shipyards, accelerating China’s naval modernization. In underwriting the growth of China’s military and economic power, they risk marginalizing U.S. and allied competitiveness in a key industry and undermining peace and security in the Indo-Pacific. 

China’s rise in the global commercial shipbuilding industry has been extraordinary. The country’s market share surged from a mere 5 percent of the world total in 2000 to over 53 percent in 2024. South Korea and Japan, the only two other prominent players in the industry, have seen their combined share slip from 74 percent to 42 percent over the same period.

China is poised to cement its chokehold on the industry, with new order books indicating that it will grab even greater market share in the years to come.

These trendlines have triggered alarm bells in Washington. Senior political and military leaders in the United States, including President Donald Trump, are calling for a revival of U.S. shipbuilding to counter China’s ascendant maritime power.

Yet, more is at stake than just economic competitiveness. Many of the shipyards that support China’s commercial production also produce warships for the Chinese navy. The ability to leverage dual-use technologies, infrastructure, and materials for both commercial and naval shipbuilding provides cost savings and strategic benefits.

In peacetime, orders for merchant ships sustain demand that keeps dual-use production lines humming, and during economic downturns naval ship orders can help offset downswings in commercial markets. In wartime, commercial production lines can be converted to naval production, rapidly scaling up the ability to churn out and repair warships.

Read the full report:
Ship Wars: Confronting China’s Dual-Use Shipyards

This is, in part, the logic behind China’s “military-civil fusion” (MCF, 军民融合) strategy, which aims to eliminate barriers between the commercial and defense sectors. As part of this MCF strategy, many Chinese shipyards have intentionally blurred the lines between military and commercial activity.

At the massive Changxing Island shipbuilding base in Shanghai, for instance, dozens of commercial vessels and surface combatants can be seen under construction at once, interspersed across the sprawling facility. A similar scene is visible at the Longxue Island shipbuilding base in Guangzhou—the largest in southern China.

Both facilities are operated by the state-owned giant CSSC, the world’s largest commercial shipbuilder and the company tasked with building China a “first-class navy.” CSSC’s senior executives have eagerly embraced MCF as key to their success, with one top engineer urging the company to “focus on the transfer of civilian technology to military technology, especially the transfer of shipyard civil shipbuilding methods.” 

In isolation, China’s efforts to exploit overlaps between its commercial and defense industries are neither surprising nor unique. But as the global maritime industry has become increasingly reliant on China’s dual-use shipyards to meet the growing demand for new merchant vessels, a new challenge has emerged.

Foreign firms—many of which are based in countries with close defense relationships with the United States—are pouring billions of dollars of ship orders and transferring key technologies to China’s military industrial base. As a result, they are inadvertently bolstering China’s naval modernization.

This system has taken shape in part because the opaque nature of China’s far-reaching national security apparatus makes it difficult to distinguish between strictly commercial entities and those supporting China’s military build-up.  

To clarify the risk landscape, Hidden Reach analyzed over 4,500 shipbuilding records to develop a first-of-its-kind dataset of 307 active Chinese shipyards. Leveraging commercial satellite imagery and other open-source material, the analysis categorizes each shipyard into one of four tiers according to its integration into China’s naval shipbuilding ecosystem and broader defense industrial base.

The four tiers are defined as follows:

The scale and capacity of China’s shipyards have made them increasingly attractive for global shipping companies. Between 2019 and 2024, foreign firms (outside of China and Hong Kong) purchased over 70 percent of all ships produced in China.

Despite the visible ties between China’s Tier 1 shipyards and China’s navy, foreign buyers have ordered heavily from these yards. Between 2019 and 2024, foreign firms purchased 305 commercial vessels from Tier 1 shipyards alone, collectively bringing in tens of billions of dollars in revenue and pushing China’s naval yards further into the forefront of the global commercial shipbuilding market.

Firms headquartered in countries with formal military alliances with the United States, including Japan, South Korea, France, Greece, and Denmark, have all bought from Tier 1 shipyards in recent years. Other key partners, including Singapore and Switzerland are also represented in the order books of these shipyards. Even two U.S.-based firms purchased several hulls from Tier 1 yards.

Most strikingly, companies based in Taiwan have purchased heavily from high-risk shipyards, despite constant threats of Chinese military aggression against the island. One major Taiwan-based shipping firm, Evergreen Marine Corporation, appears particularly partial to Tier 1 yards, with over 15 percent of its fleet built in shipyards that also assemble warships for the PLAN.

Taken together, the hundreds of orders placed by foreign companies into Chinese shipyards have amounted to a massive injection of funds. According to China’s national shipbuilding industry association, the country’s commercial ship exports brought in a staggering $43 billion in 2024.

While sparse public information makes it difficult to calculate how revenues are distributed across the tiers, sporadic public announcements reveal that Tier 1 shipyards regularly win highly lucrative contracts reaching billions of dollars in value.

In 2024, Tier 1 shipyard Hudong-Zhonghua broke records when it signed a contract worth nearly $6 billion with QatarEnergy to build 18 liquefied natural gas (LNG) carriers. This contract came on the heels of a 2023 deal worth nearly $3 billion inked with France’s CMA CGM for 16 dual-fuel container ships to be built at Jiangnan, Dalian, and Hudong-Zhonghua—all Tier 1 yards.  

There is clear evidence that the revenue collected from these and many other deals is being reinvested to expand the already massive capacity of CSSC’s largest shipyards. At the sprawling Changxing Island shipbuilding base in Shanghai and Longxue Island in Guangzhou, CSSC is pursuing expansion and upgrading projects worth a combined $5 billion.

These projects include new drydocks and fabrication halls, as well as new research and development centers aimed at applying cutting-edge technologies to ship manufacturing.

China’s leading position in the global shipbuilding market has also made it an unavoidable destination for companies specialized in producing high-value subcomponents that go into modern vessels. Dozens of foreign suppliers have rushed to establish a presence in China, sharing valuable technologies with Chinese shipyards through licensing agreements, joint ventures, and even direct sales.

While many of these technologies are limited to civilian applications, some are also upgrading the capabilities of warships. Chinese shipbuilders have proven adept at exploiting the gray area of dual-use technology to gain access to foreign technologies that have helped them overcome important technical hurdles, particularly in marine propulsion.