Asia Looks Seaward

harbors, ships, shipyards, and oil transport lines, along with the governing laws
and regulations.^26 In particular, improving China’s domestic oil pipeline net-
work would enhance energy security. Robust capacity to shift oil supplies rapidly
between major demand and import areas would introduce a degree of redun-
dancy in case an incident closed one or more major VLCC-capable ports.
An improved pipeline network would alsobolster the effectiveness of China’s
growing strategic petroleum reserve by allowing for a rapid infusion of supplies
into an integrated market in the event of a crisis. By 2010, Chinese companies
plan to expand the country’s pipeline network for oil, gas, and other products
from 40,000 to 65,000 kilometers.^27 In essence, China has three port zones
capable of accommodating VLCCs. The first encompasses the Bohai Gulf area,

An Oil Armada? 119

Table 6.2 Chinese Shipbuilding Industry vs. Main Competitors

PRC Japan/South Korea

Bulk of ships built are of low

complexity.

More proficient at high-value ship construction.

Lower price Higher prices

Gaining technological proficiency,

but still behind state-of-the-art.

Main yards are technologically state-of-the-art.

Relatively weak domestic innovation

capacity.

High domestic innovation capacity.

Willing to customize ships. Emphasize series production, little

customization.

Low labor costs. High labor costs, but partially offset by higher

technical proficiency.

Has significant land area for physical

expansion.

Must build yards overseas and outsource, since

space for expansion is scarce.

Extensive co-siting of commercial and

military shipbuilding.

Commercial and military shipbuilding

separated. Much less military shipbuilding

activity at present.

Quality control problems. Excellent quality control.

Problems with on-time delivery. Timely delivery.

Weak marine equipment industry

(only 40 percent of ship equipment is

domestic).

Japan has strong marine equipment industry

(95 percent of ship equipment is domestic);

85 percent of South Korean ship equipment is

domestic.

Lower degree of integration between

shipbuilding and supporting industries

such as steel and marine equipment.

Higher integration due to old industrial

groupings (keiretsu and chaebols).

Shipbuilding seen as a ‘‘pillar industry’’ in all three countries. The idea is that the

industry can promote wider industrial development.