5264c49c en

STATE-OWNED
ENTERPRISES IN
THE SHIPBUILDING
SECTOR
OECD SCIENCE, TECHNOLOGY
AND INDUSTRY
POLICY PAPERS
February 2021 No. 98
2 | STATE-OWNED ENTERPRISES IN THE SHIPBUILDING SECTOR
This paper was approved and declassified by the OECD Council Working Party 6 on Shipbuilding
(WP6) on 26 November 2020, and was prepared for publication by the OECD Secretariat.
Note to Delegations:
This document is also available on O.N.E under the reference code:
C/WP6(2020)5/FINAL
This document, as well as any data and any map included herein, are without prejudice to the
status of or sovereignty over any territory, to the delimitation of international frontiers and
boundaries and to the name of any territory, city or area.
© OECD (2021)
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OECD SCIENCE, TECHNOLOGY AND INDUSTRY POLICY PAPERS

STATE-OWNED ENTERPRISES IN THE SHIPBUILDING SECTOR |3
State-owned enterprises in the shipbuilding sector
Laurent Daniel, Changhoon Lee, Pieter Parmentier
Abstract
This paper uses firm-level data analysis to assess the extent, and the economic and policy
implications of state-owned enterprises (hereafter SOEs) in the shipbuilding sector. Even
though the available data appears to be limited in certain respects, one of the paper’s key
findings demonstrates that SOEs occupy a significant share in global ship completions, but
are likely to operate with lower profitability rates and to be more highly leveraged than
private enterprises. This report also presents a number of guiding principles to assess SOEs’
behaviour and their potential impact on the shipbuilding market, such as good corporate
governance frameworks and the principle of competitive neutrality. To provide a concrete
comparative analysis of SOEs and their private counterparts, the paper examines a case-
study comparing the Chinese central state-owned enterprise CSIC and its private counterpart
Yangzijiang Shipbuilding.
Keywords : Shipbuilding, State-owned enterprises, Industrial policy

Table of Contents
1. Executive Summary .......................................................................................................................... 5

2. State as a shareholder ....................................................................................................................... 6
3. State-owned enterprises in the shipbuilding sector: overview and economic performance ....... 7
3.1. Overview of SOEs in the shipbuilding sector ............................................................................... 7
3.2. Economic Performance ................................................................................................................. 9
Sales and employment ...................................................................................................................... 9
Profitability .................................................................................................................................... 11
Indebtedness ................................................................................................................................... 12
4. Policies impacting SOEs.................................................................................................................. 14
4.1. OECD instruments: short overview ............................................................................................ 14
4.2. Cross-border investments............................................................................................................ 16
4.3. Case-study: State-owned enterprise v. privately-owned enterprise in China ............................. 17
4.3.1. State-Owned Enterprise: China Shipbuilding Industry Corporation (CSIC) ....................... 18
4.3.2. Privately-Owned Enterprise: Yangzijiang Shipbuilding ...................................................... 23
5. Conclusion and futher remarks ..................................................................................................... 28
References ............................................................................................................................................ 30
Annex: Datasets used in the Report ................................................................................................... 31
Endnotes ............................................................................................................................................... 32
Figures
Figure 1. Localisation of shipbuilding SOEs and non-SOEs among the top 177 shipbuilders ............... 8
Figure 2. Ship completions of shipbuilding SOEs by selected regions in 2018 ...................................... 8
Figure 3. Number and ship completions of shipbuilding SOEs in the OECD and the rest of the
world................................................................................................................................................ 9
Figure 4. Average sales and employment by ownership type, 2009-2017 ............................................ 10
Figure 5. Distribution of SOEs and non-SOEs in terms of sales (vertical axis) and employment
(horizontal axis) in 2017................................................................................................................ 11
Figure 6. Profitability indicators by ownership type ............................................................................. 12
Figure 7. Indebtedness indicators by ownership type............................................................................ 13
Figure 8. China’ share in terms of ship completions of largest shipbuilding SOEs .............................. 18
Figure 9. CSIC corporate structure........................................................................................................ 19
Figure 10. Yangzijiang Shipbuilding corporate structure ..................................................................... 23
Figure 11. Selected financial and economic metrics of Yangzijiang Shipbuilding and CSIC (2019) .. 25

1. Executive Summary
In market economies, a vast majority of commercial enterprises are privately owned as this
type of company is usually perceived to be more efficient and to allocate scarce resources
more effectively, thereby producing products at a lower cost for consumers. However, for
various reasons some commercial activities are not performed by private companies but by
public actors in some economies. Addressing perceived market failures is one of the
reasons for governments to establish and maintain state-owned enterprises (SOEs).
Moreover, SOEs sometimes have a broader social and/or societal mandate as they may
provide for products and services for society at large.
Over the last decade, in some cases there has been an increasing tension between the
extensive role that SOEs can play in several markets and the current international rulebook
intending to establish competitive conditions between SOEs and private players and
between domestic and international actors. Some experts consider that governments have
a strong influence on SOEs’ behaviour. For this reason, in some cases, SOEs’ decision-
making could be considered to be driven not only by economic factors but also by political
considerations, which could distort international competitive conditions.
The current report aims to provide an overview of SOEs in the shipbuilding sector and
intends to provide examples of the impact that they may have on international trade and
competition. A first chapter explores the extent of SOEs in the shipbuilding sector and
compares their economic performance with private enterprises. The analysis indicates that
SOEs account for a significant share of global shipbuilding completions. In 2018, with the
chosen definition for SOEs in this report based on majority ownership, 57 of the world’s
177 shipbuilding companies were state-owned, representing about 35% of global ship
production. The analysis further demonstrates that SOEs in the shipbuilding sector are
likely to operate with lower profitability and higher levels of indebtedness compared to
private enterprises.
A second chapter presents a number of international instruments that may act as guiding
principles for SOEs’ behaviour and aims to provide concrete examples of cases where
SOEs seem to be treated differently compared to their private counterparts. The current
report does not comment on the motives for establishing a SOE, as governments may have
different rationales for specific activities to be carried out by SOEs.
Given that the concrete impact of a SOE’s behaviour will always need to be assessed
against the peculiarities of a concrete case, the report presents a case-study that compares
a large SOE in the People’s Republic of China (hereafter ‘China’) with a private
counterpart. In this example, ownership alone appears to be insufficient to guarantee a
level-playing field between different company types.
The overall conclusion of this report suggests that the institutional framework in which
companies operate will be a more important determinant to explain their behaviour and
performance than ownership status per se, but more research would be needed to draw
conclusions for other jurisdictions than China.

2. State as a shareholder
As a basis for analysis, it is important to first establish the criteria to classify a company as a
SOE. Empirical studies have typically operationalised SOEs differently and also within the WP6
there is no agreement between members on the definition of what constitutes a state-owned
enterprise.
For the purposes of the current report, the following working definition is employed to
conceptualise a state-owned enterprise: “A state-owned enterprise is any corporate entity
recognised by national law as an enterprise, and in which the state acts as ultimate beneficiary
owner of the majority of the voting shares. This includes joint stock companies, limited liability
companies and partnerships limited by shares. Moreover statutory corporations, with their legal
personality established through specific legislation, should be considered as SOEs if their
purpose and activities, or parts of their activities, are of a largely economic nature.”
This definition is based on the definition agreed in the OECD Guidelines on Corporate
Governance of State-Owned Enterprises (2015) and is in line with previous (OECD) large-scale
work on state enterprises at industry and/or country levels as well as with the definition that was
deployed in the previous version of the report on SOEs in the shipbuilding sector (2013) 1. The
advantage of employing the same definition of a SOE in the current report as in the SOE report
of 2013 is that it will be easier to draw comparisons between these two reports and to assess how
the impact of SOEs on the shipbuilding has evolved since then.
The Secretariat has opted to limit the definition of a SOEs to majority ownership by the state
and not to expand it to company control by the state. Some WP6 members have nonetheless
voiced the view that including a control dimension is likely to provide a more accurate view of
the practical impact of SOEs in the shipbuilding sector. Indeed, the OECD guidelines include in
the definition of a state enterprise an ownership as well as a control dimension (‘any public entity
that exercises a certain degree of control’). 2 It is clear that including the control dimension
potentially captures a higher number of companies that are directly or indirectly controlled by a
public entity and may thus allow for a more comprehensive understanding of a company’s
governance structure and hence decision making process in practice. Moreover, by including a
control dimenstion the temporary nature of the state ownership can also be taken into account.
However, identifying (direct and indirect) control is very difficult and resource-intensive as no
complete data are available (hence requiring data collection, screening and assessment) and is
seldomly applied in large-scale empirical work. Unfortunately, extending the definition of a SOE
to encompass control was not possible because of the Secretariat’s limited resources either.
Therefore, the paper will limit its analysis to majority owned SOEs. For this reason, an enterprise
is considered a SOE if the state ownership represents more than 50% of the shares, indicating a
significant ownership link. In case it is not possible to unravel the percentage of state ownership
in a company, other mechanisms are detected through which the state may effectively control
the company. The definition of “state” used in this report is broad and includes central, local
administrations, governmental agencies, and public financial institutions 3.
The ownership structure of a company - especially when the company is publically traded - can
to a certain extent be retrieved from databases such as Orbis. This database illustrates that for
most of the largest state-invested shipyards, the equity stake represents more than 50 percent of
the shares. The biggest public shipyards will therefore provide a representative sample of the
impact of SOEs on the shipbuilding market.

3. State-owned enterprises in the shipbuilding sector: overview and economic

performance
The current chapter provides an overview of SOEs that are active in the shipbuilding sector
and compares their economic performance with private shipbuilding companies.
In order to collect data and perform an analysis of state-ownership in the shipbuilding
industry, the report draws upon two commercial databases: Clarkson’s World Fleet
Register to collect information about the shipbuilders and ORBIS to discern financial and
ownership indicators. A more detailed description of these databases can be found in the
Annex. For this study, the Secretariat also relied on each company’s website and on various
press articles related to shipbuilding companies.
3.1. Overview of SOEs in the shipbuilding sector
In terms of compensated gross tonnes (CGT), the world’s top 200 shipyards, excluding two
yards for which information is not available, accounted for 94.4% of global completions in
2018, amounting to 30.1 million CGT 4. These 198 shipyards belonged to 177 shipbuilding
companies, some of which may be interrelated as companies of a larger company structure.
The Secretariat conducted research to identify which share of these 177 companies is
predominantly held by the state. Within these companies, 57 are state-owned (i.e. majority-
owned by the state), producing 11.3 million CGT, equivalent to 35.3% of global
completions in 2018.
Figure 1 and Figure 2 show the geographical distribution of SOEs among the top 177
shipbuilders. As can be observed from the figures, the vast majority of SOEs is based in
Asia, both in the number of companies and completions of seagoing vessels. About 85%
of the SOEs are located in non-OECD countries, accounting for 65.2% of completions of
the SOEs in 2018 (Figure 3).

Figure 1. Localisation 5 of shipbuilding SOEs and non-SOEs among the top 177 shipbuilders
Source: OECD Secretariat based on data from Clarksons.
Figure 2. Ship completions of shipbuilding SOEs by selected regions in 2018

Figure 3. Number and ship completions of shipbuilding SOEs in the OECD

and the rest of the world
(a) Number of SOEs (b) Completions in millions of CGT of SOEs in 2018
3.2. Economic Performance
Several empirical studies conclude that if not well-governed in line with the OECD
Guidelines, SOEs can be less efficient and flexible than their private sector counterparts,
due to possible adverse incentives such as fewer budget constraints and lower shareholder
pressure for returns (OECD, 2016). SOEs may also benefit from undue support measures
by governments such as preferential financing, grants and subsidies. Accordingly, it is
argued that SOEs – and their government owners – may not be driven by profit
maximisation goals to the same extent as comparable privately-owned companies and may
have less incentives to be efficient with their corporate borrowings due to perceived or
actual government guarantees, as compared with private companies.
This section assesses the business performance of SOEs compared to private companies
among the top 177 shipbuilding companies mentioned in section 1.1. To conduct this
analysis, the Secretariat gathered financial indicators from 2009 to 2017 of these companies
from the ORBIS database. As a caveat one needs to remark that this database lacked certain
data inputs 6. Therefore, the sample had to be reduced in function of data availability.
Sales and employment

The average sales of non-SOEs has been higher than that of SOEs for the time period
between 2012 and 2017 (Figure 4.A). On the other hand, the average number of employees
in SOEs has been about 1.3 times higher than that of non-SOEs in the period 2009-2017
(Figure 4.B).
Figure 5 shows the distribution of SOEs and non-SOE in terms of sales and number of
employees in 2017. In 2017, the average sales per employee was two times higher for non-
SOEs than for SOEs.

In total, SOEs employ on average more people than non-SOEs in the shipbuilding industry.
Employment is an important factor shaping the dynamics of productivity and efficiency in
the industry (OECD, 2018). Moreover, employment is one of the most critical factors to be
considered when it comes to industry restructuring, because there is a significant impact on
the local economy when a shipyard closes.
Figure 4. Average sales and employment by ownership type, 2009-2017
Source: OECD calculations based on data from ORBIS.

STATE-OWNED ENTERPRISES IN THE SHIPBUILDING SECTOR | 11
Figure 5. Distribution of SOEs and non-SOEs in terms of sales (vertical axis) and
employment (horizontal axis) in 2017
Profitability
Profitability is assessed through the pretax profit margin (PM) 7 and the return on assets
(ROA) 8 . Figure 6 shows that SOEs in the shipbuilding industry are significantly less
profitable than non-SOEs. Average PM and average ROA went down for both SOEs and
non-SOEs since 2010 due to a global downturn in the shipbuilding sector, even though
there was a slight rebound for non-SOEs in 2015. Non-SOEs had higher PM and ROA than
SOEs for the whole period of analysis.

Figure 6. Profitability indicators by ownership type
Indebtedness
Indebtedness is analysed using two financial indicators, the debt to assets ratio (D/A) 9 and
the solvency ratio 10. Figure 7 shows that SOEs in the shipbuilding sector are more indebted
than non-SOEs. For the whole period of analysis (2009-2017), the average D/A of SOEs
was higher than the D/A of non- SOEs. In 2017, the liabilities accounted for 96% of assets
on average for SOEs in the sample, compared to 70% for non-SOEs. Some SOEs have a

D/A over 100%, which means the SOEs were extremely leveraged and high- risk to invest
in. In contrast, the ability of SOEs to meet financial liabilities using operating incomes, as
measured by the solvency ratio, is lower than for non-SOEs. In 2017, the solvency ratio of
non-SOEs was on average 48%, compared to 33% for SOEs.
Figure 7. Indebtedness indicators by ownership type

4. Policies impacting SOEs
The current chapter aims to identify and analyse several policies that govern SOEs in the
shipbuilding sector. While there may be large differences between countries, this chapter
intends to understand if some SOEs enjoy greater benefits than their domestic or foreign
private counterparts. The chapter is subdivided into an overview that sets out the
international framework on corporate governance in SOEs and a concrete case study.
Because of the prominent role SOEs play in China’s corporate sector (as compared with
other shipbuilding countries) but also in contributing to the growth and development
ambitions of China 11 , this section includes a specific case study on China. It is well
documented that when political insiders sit on corporate boards of SOEs or in their
executive management, (be they ranking members of political parties or elected
politicians), that SOEs decision making may be subject to undue political intervention –
something that the OECD SOE Guidelines position themselves strongly upon.
Furthermore, research documented by Q. Li, Ch. Lin and L. Xu illustrates that the presence
of political insiders in SOEs may lead to a situation where investment decisions are aligned
with electorial interests and offers SOEs access to preferential treatment, including access
to financing through state-owned financial institutions. 12
4.1. OECD instruments: short overview
Given that SOE shipyards may benefit more easily from the support and guarantee from
the state than a privately owned company, SOEs may – in some cases - be able to operate
with lower profitability and higher debt than private companies. While comparing the
behaviour and impact of public and private firms on the shipbuilding market, this report
will be guided by the main principles of the OECD Guidelines on the Corporate
Governance of State-Owned Enterprises (2015). The Guidelines are recommendations to
governments on how to ensure that SOEs operate efficiently, transparently and in an
accountable manner. Its main tenets are:
• The state should disclose the rationales for state ownership to the general public,
who are the ultimate owners of SOEs. The purpose of state ownership should be to
maximise value for society.
• The state as an owner should be professional, transparent and accountable.
• SOEs should compete on a level playing field with private companies. State
ownership and regulatory functions should be separate to avoid conflicting
objectives.
• Non-state shareholders should have equitable treatment and equal access to
corporate information.
• SOEs should respect stakeholders’ rights and implement high standards of
responsible business conduct.
• SOEs should be subject to the same high standards of accounting, auditing and
disclosure as listed companies.
• SOE boards of directors should have the mandate, autonomy and independence
to set enterprise strategy and oversee management, absent of political
interference. 13

Against this backdrop, it is noted that good corporate governance is not an end in itself but
rather an essential feature to inspire business confidence and business integrity, which on
their turn alleviate access to capital. The quality of a country’s corporate governance
framework is therefore of decisive importance for the dynamics and the competitiveness of
its business sector. 14
While not all countries in the world have demonstrated their willingness to credibly
implement the instrument, the Guidelines remain the only known global reference in the
area of corporate governance of state-owned enterprises and are widely recognised as
international best practice. The OECD Guidelines are also derived from the G20/OECD
Principles of Corporate Governance which have been endorsed by all G20 and OECD
economies. 15 The ongoing SOE reforms in a number of countries, including China 16, also
demonstrate that many countries are aligning their practices with these internationally
accepted standards on corporate governance.
Given the strategic role that the shipbuilding industry plays in certain countries’ industrial
policies 17, one can expect this industry to be susceptible to more politicised influences.
Acting in such an environment increases the necessity to preserve essential principles of
corporate governance. This is particularly important as the preferential treatment of SOEs,
notably in a context that lacks transparency about SOE decision making or its strategic
objectives, to achieve industrial policy objectives may lead to sub-optimal outcomes such
as the creation or exacerbation of excess capacity or other forms of competitive distortions.
To guard against these risks, governments can establish rules to promote ‘’competitive
neutrality’’ between SOEs and private enterprises as well as between domestic and
international players in order to help build trust in a level playing field. This term is defined
by the OECD as follows:‘’Competitive neutrality occurs where no entity operating in an
economic market is subject to undue competitive advantages or disadvantages.’’ 18 Some
of these undue competitive advantages or disadvantages may be the result of ownership or
legal status, location of a business’ activities or head office, a company’s public service
obligations, the importance of a business as major employer, its strategic importance or its
market dominance. 19
Box 1. Competitive neutrality

The concept of competitive neutrality builds on the following elements that contribute to
level the playing field between public and private entities:
• Streamlining government business in terms of structure and corporate form. When
feasible and economically efficient, corporatisation of government business, as well as the
appropriate structural separation of commercial and non-commercial activities, may
enhance the ability of commercial activities to operate in a market consistent way.
• Identifying costs. Promote transparency and disclosure practices, while identifying the
costs of a given function of commercial activity.
• Attaining commercial rates of return. Government business operating in a commercial
and competitive environment should ensure rates of return consistent with the market.
Earning returns under the market level for a reasonable amount of time may undermine
private sector competitors.

• Accounting for public service obligations. Ensure that concerned entities are adequately
and transparently compensated for any non-commercial obligations. This should be made
on the basis of the additional cost of such requirements.
• Tax and regulatory neutrality. To level the playing field, the same regulatory framework
and tax treatment should be applied to both private and public sector businesses.
• Debt neutrality. Ensure that the same sources and conditions of financing apply to both
government and private sector businesses. While the need to avoid concessionary financing
is well accepted, government businesses tend to benefit from preferential access to finance.
SOE financing should be obtained on commercial terms and benchmarked against market
rates.
• Public procurement. Procurement policies and procedures should be competitive, non-
discriminatory and transparent. This is particularly important when incumbent SOEs
participate in calls for tenders, outsourcing and other forms of public-private partnerships.
Source: box taken from OECD, ‘’State-Owned Enterprises in the Shipbuilding Industry’’, 2013, 11,
C/WP6(2013)8; based on OECD, ‘’Competitive Neutrality Maintaining a Level Playing Field
Between Public and Private Business’’, 2012, http://www.oecd.org/corporate/50302961.pdf
For reference, it is noted that there are discussions ongoing in the context of the OECD’s
Competition Committee to update the definition of competitive neutrality. 20 In addition,
some free trade agreements such as the Comprehensive and Progressive Agreement for the
Trans-Pacific Partnership (CPTPP) or the EU-Vietnam Free Trade Agreement have
included references to the competitive neutrality principle.
4.2. Cross-border investments
Earlier OECD research 21 already highlighted the changing role that large SOEs play in the
international market place. The expansion of SOEs in foreign markets is not always
restricted to purely commercial considerations. One needs to pay particular attention to the
distortive impact that political investment decisions may have on third nations, notably
when SOEs benefit from privileged treatment.
The total number of cross-border investments by SOEs seems fairly limited in the
shipbuilding sector. Some examples include the investment by the Korean DSME in DSME
Shandong (China) 22, the joint venture by SOE Fincantieri, Carnival and SOE CSSC23, the
investment by SOE Shandong Heavy (part of Weichai Group) in Ferretti 24 or the
investment by SOE AVIC (and in a later stage China Merchants industry Investment Ltd.)
in Deltamarin. 25 It is observed that the Chinese Ministry of Industry and Information
(MITT) has already encouraged key enterprises to carry out overseas mergers and
acquisitions in its Twelve Five-Year Implementation Plan for the Shipbuilding Industry. 26
There appears to be a larger number of examples of private, foreign firms that invest in
Chinese shipbuilding SOEs 27 or in SOEs of other countries. 28 Given that this section only
includes investments by SOEs in foreign companies these examples are not elaborated on.
Investments by SOEs, notably by Chinese SOEs, in logistics companies or port
infrastructure are more common than investments in shipyards. In 2014, the transport sector
constituted the second largest sector for outbound Chinese investments. 29 Some examples
of Chinese cross-border investment are the investment by China Ocean Shipping (Cosco)
in the Singaporean company Yantai Raffles Shipyard (2008); the investment by China

Communications Construction in the Mozambiqian branch of Vale (2013); the investment

by Dalian Shipbuilding (CSIC) in the Egyptian company Sino Tharwa (2013); the
investment by China Merchants in the French company CMA-CGM (2013); the investment
by China Merchants, CIC and Cosco in the Turkish company Fina Liman (2015); the
investment by China Shipping Ports Development (Cosco) in the Korean company Korea
Express Busan Container Terminal (2015); the investment by Cosco in the Dutch company
Euromax Terminals Rotterdam (2016); the investment by Cosco in the Italian branch of
Maersk (2016); the investment by China Ocean Shipping (Cosco) in the Spanish company
Noatum ports (2017); the investment by China Merchants in the Brazilian company TPC
(2017) 30. 31
Scholars have already raised concerns about the motives of cross-border investments,
notably in relation to China. This is why this section pays particular attention to the position
of China. More concretely, scholars have argued that some of the cross-border investments
by central SOEs in China may not only be inspired by commercial considerations but also
by political objectives such as extending political and diplomatic influence, particularly in
investment projects that touch upon strategic policies (cfr. ‘’go global’’, Belt and Road
Initiative or Made in China 2025). This may result in an investment strategy that is broader
than maximising profits and that focuses on long term policy objectives. 32
In practice, the alignment between a SOE’s objectives and the Chinese state’s objectives,
however, needs to be nuanced. While SOEs may be dependent on state funding or political
connections to invest abroad, this does not necessarily imply that the SOE actively
promotes the underlying political objectives of its investment decision. Sometimes the
SOE’s support for strategic policies rather takes the form of ‘’[a]voiding negative political
attention’’. In addition, a Chinese SOE may be incentived to invest abroad to avoid
domestic constraints or for purely economic reasons. 33 Therefore, the possible political
strings attached to a certain investment decision need to be assessed on a case-by-case basis.
Even though China may have predominantly been criticised to let some of its cross-border
investments be influenced by political considerations, it may be argued that other countries
have equally engaged in similar practices. In 2019, a private US-Australian consortium for
instance expressed its interest to buy the Subic Shipyard (Philippines), which is part of the
Korean SOE shipbuilder Hanjin Heavy Industries and Construction. Some newspapers
have alleged that this bid 34 was inspired by a drive to avoid that the company would be
acquired by a Chinese company. 35
4.3. Case-study: State-owned enterprise v. privately-owned enterprise in China
To assess some of the potential differences in treatment that different types of companies
may be confronted with in practice, reference is made to an in depth case study. Ideally, an
analysis would compare a SOE organised at the central level and a local SOE organised at
the subnational level with both a privatised company 36 and a purely private company to
gain insights into whether a distinction should be made between SOEs and private
companies as well as between different types of SOEs and private companies. Due to time
and resource constraints, the case study is restricted in scope to a comparison of a SOE and
a privately owned company. Restricting the analysis to these two types may fail to capture
some of the nuances between subclasses of ownership types but should make it possible to
provide illustrations of some broad tendencies. The case-study is restricted to the
enumeration of a few exemplary differences between central SOEs and private enterprises
in China. The conclusions of this case-study are restricted to the examples that are listed

herein and cannot necessarily be generalised to other examples, other companies or other
countries.
Shipbuilding SOEs exist across economies but are particularly pronounced in China. China
has the highest share of SOEs amongst its large shipbuilding companies and accommodates
the world’s highest number of SOEs. 37 As shown in Figure 8, Chinese shipbuilding SOEs
accounted for 62 percent of global SOEs’ production in CGT terms in 2018. Additionally,
as illustrated by the OECD Report on Shipbuilding in China (2020), China takes a
prominent position in the shipbuilding market, notably in the construction of some types of
bulkers and tankers.
Figure 8. China’ share in terms of ship completions of largest shipbuilding SOEs
In millions of CGT, in 2018
38%
(4.3)
62%
(7.0)
China non-China
Note: This calculation is limted to the data of SOEs covered in Chapter three.
Source: OECD Secretariat based on data from Clarkson.
Therefore, reference is made to a Chinese case-study. The China Shipbuilding Industry

Corporation (CSIC) 38 is a central SOE 39 and is one of the biggest shipbuilders in China and
in the world. 40 Given that this company merged in 2019 with the China State Shipbuilding
Corporation (CSSC) 41, occasional reference will equally be made to CSSC. CSIC is then
compared with the Yangzijiang Shipbuilding Group, i.e. the largest privately-held
shipbuilding company in China. With reference to section 4.1. the principles of competitive
neutrality and corporate governance will serve as guiding principles.
4.3.1. State-Owned Enterprise: China Shipbuilding Industry Corporation (CSIC)

The China Shipbuilding Industry Corporation (CSIC) was founded in 1999 and currently
employs around 160 000 workers. 42 The company is envisioned as an “important backbone
state-owned enterprise”, managed at the central level (yangqi) 43 and was rewarded the A-
label (i.e. highest label in terms of business performance).44 This type of company often
acts as a ‘national champion’ 45 , is structured as a conglomerate, is part of a domestic
network of SOEs and state-owned banks, and holds a pivotal role in shaping and

implementing China’s industrial policies. CSIC Limited is listed on the Shanghai stock
market.
Figure 9. CSIC corporate structure
Source: Based on CSIC Ltd., CSR Report 2019, http://www.csicl.com.cn/n358/n362/c16936/part/16572.pdf and

http://www.csic.com.cn/n11/index.html

Corporate governance framework of China’s central SOEs

CSIC is fully owned by and directed by the strategies of the State-Owned Assets Supervision and
Administration Commission (SASAC). SASAC on its turn resorts under the umbrella of the State Council,
i.e. a political organ which is comparable with a cabinet and which is tasked with supervising the
implementation of national policies at the decentralised level. In the context of SOEs being supervised by
a centralised organ, C.J. Milhaupt and M. Pargendler contend that “[a]t least for some purposes, the
interests of the national SOE business groups are viewed collectively - that is, the important consideration
for SASAC and the CCP is to maximise the interests of the state sector as a whole, rather than at the
individual firm or group level.” 46
Building on the reflection that central SOEs are under the direction of SASAC and the State Council, it
cannot be excluded that there is a strong correlation between the exposure of a company to China’s
industrial policies and the commensurate level of state support. A statement on the website of DSIC could
be interpreted against this proposition. 47 Subsequently, the training classes that are organised for staff of
CSIC who wish to apply for membership of the Communist Party48 raise the question of interlinkages
between party membership and corporate promotion. 49
There is also a question of how the corporate governance system of central SOEs in China shapes a SOE’s
decision-making process. Several authors have pointed out that political interference in the decision-
making process of SOEs has increased since the early 2000s. The tools of the Communist Party to control
SOEs range from the appointment procedure of senior staff (nomenklatura 50), to joint appointments (i.e.
individuals who hold multiple executive positions in associated companies), leadership rotation (i.e. top
executives who change from one SOE to another SOE or to SASAC 51) and internal disciplinary forces 52.
These mechanisms are targeted at exercising political control through the leading figures of a centralised
SOE (‘leveraged personnel control’). The middle and lower managerial levels, by contrast, are more and
more depoliticised but are in turn controlled by the top management of the SOE. 53 SASAC was for instance
represented at a recent board meeting of CSSC 54, which indicates that top executives are indeed facing
some degree of external control by the Communist Party. Moreover, the supervision of the Chinese
Communist Party in China’s SOEs is explicitly included in article 33 of the Chinese Communist Party’s
Constitution. 55 Scholars have highlighted that the vast majority of SOE management rotations take place
within one company group or between competing company groups within the same sector. 56 It is not
unlikely that these moves are inspired by the creation of personal networks and by the exchange of
experience and knowledge among people in subsidiaries or sectors with positive spill-overs. As the 2015
job swap of several executives between CSIC and CSSC indicates, job rotations may also suggest that a
merger is looming. 57
Recently, Beijing enacted a provisional regulation that puts the Communist Party Committees in central
SOEs ahead of the board of directors. This action seems to build on a tendency to intensify the leadership
role of Party Committees. 58 Party Committees both have a political dimension (e.g. organise study sessions
about political topics or guide employees through the procedures to join the Chinese Communist Party)
and a role to focus on staff related policies (e.g. nominating, evaluating and appointing senior staff). In
principle, the Party Committees in SOEs do not interfere with daily business operations unless they are of
strategic or political importance (e.g. major decisions; national security). 59 In practice, balancing political
with economic interests seems to be monitored via audits 60 and disciplinary committees 61.
At first glance, this trend to increase political control in central SOEs’ governance systems seems at odds
with China’s mixed ownership reform, which includes a tendency to push SOEs towards an increasing
level of economic liberalisation, including more autonomy for a SOE’s top management. 62
However, a high degree of management control by itself is no reason for concern as one would have to
assess what the control is used for, as well as under which corresponding circumstances the control will be

exerted. If political control tends to overshadow commercial decision making, there may be an unjustified
interference in the corporate decision making process.
Related to this matter, one would have to assess how the refined system of intertwined party-building and
mixed ownership interrelate with a SOE’s daily business operations. The academic literature suggests that
central SOEs are required to converge their corporate strategic objectives with China’s industrial policies,
whereas they sustain a larger level of autonomy regarding the economic metrics to achieve these politically
set industrial objectives. This implies a strengthened level of control on the political-strategic front, while
reducing control at the economic implementation side so SOEs can professionalise to compete
internationally. 63 Moreover, some have already contended that the emphasis of mixed ownership reforms
on profitability does not imply that SOEs’ decisions are taken on commercial considerations.64 In similar
vein, some authors have proclaimed that the opening up of SOEs to private capital had to be
counterbalanced with an increasing party-building control in corporate governance norms. These authors
for instance note that “for those firms that have adopted the full panoply of recommended amendments,
compliance with the corporate charter would appear to require placing political and governmental
interests above the interests of shareholders and other ordinary corporate stakeholders” and “these SOEs
exemplify an extreme form of stakeholder-oriented corporate governance, in which the interests promoted
by the board of directors and senior management are ostensibly coterminous with those of the nation-state
as a whole, at least as the national interest is interpreted by the Chinese Communist Party”. 65
The potential political influence of corporate governance bodies regarding important decisions needs to be
assessed on a case-by-case basis. Such political interference would be troublesome in light of the
G20/OECD Principles of Corporate Governance (2015) if the board of directors is hindered to ‘’exercise
objective and independent judgement’’ and if the rights of minority shareholders are neglected (chapter II
and VI of the G20/OECD Principles). 66
Corporate governance in CSIC

It seems that the managers of CSIC equally have a political and an economic role to play. The CEO of
CSIC from 2015 up to the merger with CSSC in 2019 was transferred from the China State Shipbuilding
Corporation (CSSC) and also acted as Party Committee Secretary. 67 On the website of one of CSIC’s
subsidiaries a referral is made to a speech by the former CEO of CSIC. In one of the party classes, he
emphasised the ‘’[p]arty construction implementation into grassroots units’’ and stated that ‘’the
alignment with the party's line, principles, policies, rules and regulations should be strengthened (…) and
leading cadres proposed in the party class should be ideologically and politically focused on loyalty. [They
should] be aligned on economic work and focus on execution while being aligned on the party building
work.’’ 68. In a recent meeting of the China State Shipbuilding Group, i.e. CSIC’s successor, the former
company’s chairman simultaneously called ‘’[t]o comprehensively learn from the rigorous control of the
party's achievements as well as to promote the modernization of a governance system and governance
capabilities. 69
On its website is also announced that CSIC will adhere to the new Regulations on the Work of Primary
Organisations of the Communist Party of China (trial) 70. The aspirations of these Regulations are described
as “strengthening the party building of state-owned enterprises in the new era. The formulation and
implementation of the "Regulations" will uphold and strengthen the party's overall leadership of state-
owned enterprises, improve the quality of party building of state-owned enterprises, (…)” 71 and “The
notice pointed out that state-owned enterprises are an important material and political foundation of
socialism with Chinese characteristics, and an important pillar and relying force for the party to govern
and rejuvenate the country. Adhering to party leadership and strengthening party building are the "roots"
and "soul" of state-owned enterprises, and the glorious tradition and unique advantages of our state-
owned enterprises.”72
The tools to achieve the Regulations’ objectives consist of:

• strengthening the party’s leadership of state-owned enterprises (art. 1),

• institutionalising party committees (art. 4 and following),
• demanding the official approval of the party committees for major decisions in line with “Xi
Jinping's thoughts on socialism with Chinese characteristics in the new era” (art. 11) 73,
• strengthening political theory education (art. 18),
• supervising production (art. 21-22), and
• supervision by the internal disciplinary inspection on implementation of the Party’s main
responsibilities (art. 31) 74. 75
In line with the spirit of these Regulations, the Director and Deputy Party Secretary at CSSC pointed out
in his speech of 2019 that “all units should stand for adhering to the party's leadership, strengthening
party building, and building a solid foundation of strong "roots" and "soul". 76 At the December 2019
meeting, SASAC also highlighted that “it is necessary to comprehensively strengthen the party's
leadership over central enterprises”, and that one should adhere to “improving corporate governance”. 77
MIIT equally stated that the Guiding Opinions on the Inspection Work of Central Ministries and
Commissions and Party Groups (trial) should be fully implemented, that the party committees of the
ministries should be promoted, and that a new round of inspections should be deployed from 2019. 78 In
similar vein, an inspection report conducted by the Central Commission for Discipline Inspection and the
National Supervision Commission during the 19th Central Inspection Tour states that ‘’the Party’s
leadership is integrated into the corporate governance structure’’ of CSSC. Based on this document one
could derive that inspection committees have an ‘’important political role’’ to play in verifying to what
extend China’s strategic policies were implemented by its key enterprises.79
At the same time, SASAC has issued Guidelines for Compliance Management of Central Enterprises 80 in
2018, which intend to increase the compliance level of central SOE managers and their employees with
the laws and regulations (art. 1 and 2). In addition, MIIT has already indicated that it wants to encourage
‘’self-disciplining’’ and desires to ‘’safeguard industry rights and interests’’. 81 Installing mechanisms to
monitor, review and assess a SOE’s performance and to ensure the compliance of corporate governance
principles is in line with the OECD’s Recommendation on Guidelines on Anti-Corruption and Integrity in
State-Owned Enterprises (2019) 82 as well as with the G20 Principles (2018) 83. At the same time, it is clear
from these instruments that the state should refrain from undue influence or inappropriate interventions.
The political functions that CSIC and its employees have to fulfil are equally mentioned in official
corporate documents such as CSIC’s Corporate Social Responsibility Report (2018) 84. On the one hand,
there seems to be a tendency to increase the interlinkage between a political career within the Communist
Party and a corporate career in CSIC (e.g. all top executives are a member of the Chinese Communist
Party; and there is an explicit requirement for CSIC’s executives to align important corporate decisions in
line with “Xi Jinping's thoughts on socialism with Chinese characteristics in the new era” 85). Against the
backdrop of the efforts to consolidate CSIC and CSSC, this may increase the grasp of the Communist Party
on a smaller number of key figures in the newly established China State Shipbuilding Group, thereby
influencing the strategic direction of CSIC’s corporate decision-making. On the other hand, policy
instruments such as the SASAC Guidelines indicate that Beijing increases its efforts to fortify key
personnel’s accountability and independence. This entails that in practical terms the Chinese Communist
Party is in the ability to exercise an intensified yet more centralised degree of control, whereas in parallel
CSIC is encouraged to increase its overall professionalism and international competitiveness. Whether this
working methodology conflicts with international standard practice will depend on the degree to which the
Chinese Communist Party and the corporate management act in line with the interest of CSIC’s
shareholders as well as with the general principles as laid out in the G20/OECD Principles on Corporate
Governance 86.

On the basis of an analysis of official legal, political and corporate documents and indirect guidance
through speeches and party-building, one may conclude that – in certain cases - it is likely that CSIC has
not only acted as a commercial entity but also as a vehicle to pursue Chinese industrial policy objectives.
Although, it remains important to highlight that this analysis always needs to be conducted on a case-by-
case basis.
Some elements of these Chinese policies may also provide inspiration for other countries. For instance, the
Chinese approach to incite SOEs to be mindful about their responsibility to fulfil broader societal
objectives and to subscribe to long-term goals may contribute to the ongoing debates on how corporate
governance policies can be updated 87 and may incite other shipbuilding nations to reflect on the appropriate
degree of legitimate government intervention in their own jurisdictions.
4.3.2. Privately-Owned Enterprise: Yangzijiang Shipbuilding

Yangzijiang Shipbuilding is the largest private shipbuilding company in China and employed around 6.000
people in 2017. 88 The company used to be state-owned until it was privatised in 1997 to safeguard the
company from bankruptcy. The shareholder structure as per 2019 is displayed under Figure 10.
Figure 10. Yangzijiang Shipbuilding corporate structure
Source: Based on Yangzijiang Shipbuilding, Annual Report 2019, https://links.sgx.com/FileOpen/YZJ-

Annual_Report.ashx?App=Announcement&FileID=605216, 163 and OECD internal sources
Yangzijiang Shipbuilding’s shares are listed on the stock market in Singapore. 89 The shipyards of
Yangzijiang Shipbuilding are primarily located in the province of Jiangsu along the Yangtze river and
represent a capacity of 6 million DWT annually in 2019. 90 Yangzijiang Shipbuilding concluded a strategic
joint venture with Mitsui in 2018 to target the construction of LNG carriers. 91 By partnering up with its
Japanese counterpart, Yangzijiang Shipbuilding aspires to attract orders from Japanese ship-owners. 92

Corporate governance structure

The private shareholdership of Yanzijiang Shipbuilding makes it an interesting case to compare the
company with the state-owned enterprise CSIC. Before proceeding with a detailed comparison of both
companies, it needs to be recalled that scholars have already contended that the traditional strict dichotomy
between a state-owned enterprise (SOE) and a privately-owned enterprise (POE) needs to be nuanced in
the Chinese context. 93 In practice, the degree of state influence will namely not only hinge upon a
company’s ownership structure but also on a company’s size and its relative importance for China’s
industrial development. The level of state affiliation will equally affect a company’s market access, amount
of subsidies, access to political contacts, and the execution of governmental policies. In other terms, if one
wants to measure the impact of the Chinese state sector on the Chinese economy and third-party economies,
one has to look at the privileged position of a specific firm as a whole and not just at its ownership
structure. 94 This is illustrated by recent research conducted by the Center for Strategic and International
Studies. Its report revealed that direct subsidies are evenly spread between China’s public and private
sector and states that Yangzijiang Shipbuilding Holdings even received a higher relative rate (i.e. in terms
of percentage of revenue) of direct subsidies than state-owned shipbuilders. 95
In terms of corporate governance, Yangzijiang Shipbuilding at first glance appears to subscribe to
international standards. It has for instance established a Nominating Committee, a Remuneration
Committee, and an Audit Committee – keeping in mind that its corporate governance practices will have
to meet the relevant listing requirements and securities regulations of the Singapore stock exchange. Next,
there is a separation in the role of the company’s chairman and chief executive officer. 96 Nonetheless, it is
possible that the Chinese Communist Party still holds a degree of control in Yangzijiang Shipbuilding by
influencing its corporate culture 97 (e.g. through Party Committees 98) or by soft power links through charity
initiatives 99, albeit, as suggested by the academic literature, the exertion of this control in private companies
will usually be more flexible than in central SOEs. 100
The ability of the Chinese Communist Party to exercise a certain degree of control in private firms does,
however, not imply that every private company will also be subjected to this control at all times. Party
control is more like a translucent veil that becomes visible once control is exerted. While control and its
exact externalisation should be assessed on a case-by-case basis, a higher degree of political control seems
more likely in large, private companies with growth potential that operate in strategic sectors or regions. 101
In exchange for inflated political control in companies with strategic importance, the company may enjoy
all sort of privileges, ranging from subsidies to access to a network of privileged companies and
government contacts, as well as being subjected to a more favourable application of regulations. 102
Comparison between Yangzijiang Shipbuilding and CSIC

According to figures on its website, Yangzijiang Shipbuilding’s annual shipbuilding capacity increased
thirty-fold over the past twenty years, corresponding to a twenty-fold increase in annual turnover. 103 In
2018, the consolidated turnover of the company amounted to CNY 23.2 billion, which resulted into CNY
4.1 billion in profit. The company claims to maintain a gross profit margin around 16.1 percent for its
shipbuilding activities and a 165 percent gross profit margin for shipbuilding related activities such as ship
design services. In 2018, Yangzijiang Shipbuilding secured for USD 1.46 billion in new shipbuilding
orders, in addition to the outstanding orders of USD 3.9 billion for 113 vessels. 104 According to data from
Yangzijiang Shipbuilding itself, the company’s profit margin is, however, in sharp decline. While the gross
profit margin accounted to 33.2 percent in 2013, this number decreased to 17.3 percent in 2018 Q1. The
EBITDA margin shows a similar trend. 105
It is uncertain how the COVID-19 outbreak will affect the company’s profitability for 2020. It is observed
that despite some large recent orders 106, Yangzijiang Shipbuilding has reported a drop of 60 percent (CGT)
YoY in newbuilds for the first semester of 2020, which represents the lowest number in 25 years. 107

The figures below provide an illustration of the different financial and economic metrics for the year 2019
to compare Yangzijiang Shipbuilding with its state-owned counterpart CSIC. It is observed that the
profitability and stability of Yangzijiang Shipbuilding is significantly higher than CSIC’s, despite the
higher amount of revenues and potential economies of scale that CSIC benefits from. These figures act as
illustrations. Further research would be needed if consistent tendencies can be observed.
Figure 11. Selected financial and economic metrics of Yangzijiang Shipbuilding and CSIC
(2019)

Source: Figures based on the CSR Report of CSIC Ltd. (2019), the Annual Report of Yanzijiang Shipbuilding Holdings
Ltd. (2019) and other public sources.
Note: the current ratio refers to current assets divided by current liabilities.
It is possible that the differences in return on investment are explainable by virtue of different strategic
priorities or different timeframes to achieve the company’s financial objectives. However, this is hard to
assess in practice. One can only observe that SOEs in China often enjoy implicit government guarantees;
that scholars have identified CNY 550 billion of government support to the Chinese shipbuilding sector
between 2006 and 2013, of which SOEs by far were the largest beneficiaries 108; that Chinese central SOEs
are often subjected to a more favourable regulatory framework (e.g. licensing procedures or a lower
enforcement of competition laws); and that Chinese state-owned banks are often directed to support Chinese
industrial policies. In addition, CSIC’s annual report (2018) does not seem to refer to any long-term
profitability targets. It does, by contrast, refer to strengthening the party line, improving corporate
governance, and promoting the shipbuilding industry. 109
In 2017, Lloyd’s List already recorded in an interview with Yangzijiang’s Chairman that the order of
VLOC’s by Vale would be delivered by Qingdao Beihai Shipbuilding (part of CSIC) at a price below-
cost. 110 In similar vein, the debt-to-equity swaps of CSIC and CSSC are envisaged by the Chairman as a
form of hidden government support. 111 Finally, Yangzijiang’s Chairman has criticised indirect forms of
government subsidies for state-owned yards such as secured orders by state-owned shipping companies. 112
It is not excluded that Yangzijiang Shipbuilding equally received comparable benefits as CSIC, whereas
the exact degree of government support – in the broad sense of the word - may differ. As regards direct
subsidies, the previous statement for instance needs to be nuanced. As indicated above, recent research by
the Center for Strategic and International Studies points out that Yangzijiang Shipbuilding Holdings has
received a higher relative rate (i.e. in terms of percentage of revenue) of direct subsidies than state-owned
shipbuilders. 113
So, a first consideration is that SOEs may benefit from a more favourable regulatory policy framework
than private counterparts. A second remark relates to a difference in treatment between private and state-
owned enterpises that may count on political endorsement on the one hand and other companies on the

other hand. Given the strong link between state financing, industrial policies and the commissioning of
new vessel orders by SOEs, the Chinese government is able to channel finances to those companies that
are important for its industrial development. 114 Against this backdrop, some authors point out that it will
be difficult for private enterprises to expand their business in China without some form of endorsement by
the Chinese Communist Party. 115 Indeed, smaller yards that do not enjoy any state support seem to struggle
more (e.g. a high rate of bankruptcies or take-overs by yards that receive state support). 116 As a large,
private shipyard that maintained its political connections with the Chinese Communist Party, Yangzijiang
Shipbuilding equally received subsidies and favourable treatment by the government in the past. In its
financial statements, Yangzijiang Shipbuilding reported for CNY 193.4 million in consolidated subsidies
for 2019, CNY 216.3 million for 2018 and CNY 236.9 million for 2017. 117 The annual report of 2017
mentions that Yangzijiang Shipbuilding could cut its tax rate to 11 percent, thanks to tax credit, and that
the company has been ‘’consistently able to obtain financing from PRC banks’’. 118 It remains ambivalent
under which terms this tax credit and these financial credits were provided so it is hard to measure the size
of the support.
The case-study nuances the idea that additional remedies to discipline SOEs should suffice to level the
playing field. Conversely, the case-study suggests that institutional reforms on corporate governance
should encompass all state-favoured firms, regardless of their ownership structure. Particular attention
should be drawn to disclosing requirements related to the political ties of corporate executives and the need
for increased transparency on how these executives operate. More transparency should contribute to a
higher rate of independence of top executives from political influence as well as to more effective
accountability of top executives.

5. Conclusion and futher remarks
This report has assessed the extent and the economic implications of the presence of SOEs in the
shipbuilding sector, using firm-level data analysis. Even though the data available was somewhat limited,
the key finding in this analysis shows that SOEs occupy a significant share in global ship completions but
are likely to operate with lower profitability and be more highly leveraged than private enterprises.
To promote a level-playing field between SOEs, private and foreign players, the focus should thus be on
the behaviour of SOEs and on the impact that they have on trade and competition. This impact tends to
depend on the extent of privileged government access, the overall policy framework in which companies
operate, a company’s market power, and the peculiarities of the market in which it operates.
Next, the report refers to several guiding principles that may facilitate the promotion of a level-playing
field in the shipbuilding sector. First of all, this report highlights the principle of competitive neutrality.
Subsequently, transparency about the interaction between governmental and corporate decision making
could further strengthen the mechanisms that increase the independence of corporate executives from state
influences and could contribute to a plain mechanism of accountability. A transparent system in
combination with accountable and independent executives conduces to a high quality corporate governance
system, to the protection of minority shareholders, and to more efficient public spending. Additionally,
subscribing to the principle of competitive neutrality and high standards of corporate governance
contributes to the strengthening of the trust levels of private companies, foreign enterprises and citizens
vis-à-vis state-invested enterprises. In the end, a system founded on these basic principles is assumed to be
more beneficial for the ultimate beneficiaries of the SOE, namely the citizens that the state represents.
To apply these principles on a more concrete case, a comparative analysis was conducted between the
Chinese central state-owned enterprise CSIC and its private counterpart Yangzijiang Shipbuilding. China
is an important shipbuilding nation and the Chinese economy holds a large share of SOEs. For these reasons
it was assumed that the Chinese example could offer interesting insights. The results of this case-study
tend to reject the often proclaimed assumption that a privileged treatment by the Chinese state is restricted
to SOEs. Both state-owned and privately-owned companies can be treated more favourably compared to
their counterparts lacking such state support. It remains an open question if the favourable treatment of
state-affiliated companies and SOEs is granted in exchange for enhanced state control.
Provided that the Chinese state has intensified its control over central SOEs and government affiliated
private companies, this by itself would not pose any reason for concern. The degree of intensified vigilance
would depend on what the control is used for as well as on the corresponding circumstances. If the control
is utilised to professionalise corporate governance models or to promote a level-playing field between all
different types of companies, more control could in fact be welcomed. Conversely, interpreting enhanced
state control against a broader context of Chinese policies that deploy central SOEs as a key pillar of their
industrial ambitions could raise the levels of suspicion.
In this regard, one may refer to a pertinent quote by C.J. Milhaupt and M. Pargendler: “As such, it is natural
for SOE governance to reflect the characteristics of national governance— that is, the characteristics and
quality of a national regulatory regime for SOEs is deeply influenced by prevailing national philosophy
about the proper scope of state ownership of enterprise, separation of powers, the level of corruption in
society, and related factors. There is little reason to believe that resorting to mixed ownership— by offering
a portion of a SOE’s shares to private investors — is sufficient to transform a product of the state into a
pure product of private market transactions.” 119
In line with this quote and the overall findings in this report, the overall conclusion seems to be that the
institutional framework in which companies operate will be a more important determinant to explain their

behaviour than ownership status per se. However, further research is needed to confirm this hypothesis in
other jurisdictions than China.

References
Clarkson’s Research Services Limited (2019), World Fleet Register, Clarkson’s Group,
https://www.clarksons.net/wfr.
OECD (2012), “State Ownership in the Steel Industry: Issues for Consideration”, internal working
document, Directorate for Science, Technology and Industry, No. DSTI/SU/SC(2012)6, OECD,
Paris.
OECD (2012), ‘’Competitive neutrality: maintaining a level playing field between public and private
business, OECD Publishing, Paris.
OECD (2013), “State owned enterprises in the shipbuilding industry”, internal working document,
Directorate for Science, Technology and Industry, No. C/WP6(2013)8, OECD, Paris.
OECD (2014), “The Size and Sectoral Distribution of SOEs in OECD and Partner Countries”, OECD
Publishing, Paris.
https://www.oecd-ilibrary.org/finance-and-investment/the-size-and-sectoral-distribution-of-soes-in-
oecd-and-partner-countries_9789264215610-en
OECD (2015), “OECD Guidelines on Corporate Governance of State-owned Enterprises”, OECD

Publishing, Paris.
https://www.oecd.org/corporate/guidelines-corporate-governance-soes.htm
OECD (2016), “State Owned Enterprises as Global Competitors: A Challenge or an Opportunity?”,

OECD Publishing, Paris.
https://read.oecd-ilibrary.org/finance-and-investment/state-owned enterprises-as-global-
competitors_9789264262096-en
OECD (2018), “State Enterprises in the steel sector”, No. DSTI/SC(2017)10, OECD, Paris.
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DSTI/SC(2017)10/FINA
L&docLanguage=En
OECD (2019), “Guidelines on Anti-Corruption and Integrity in State-Owned Enterprises”, OECD

Publishing, Paris, https://www.oecd.org/daf/ca/Guidelines-Anti-Corruption-Integrity-State-Owned-
Enterprises.pdf

Annex: Datasets used in the Report
1. Clarkson’s world fleet register: shipbuilding orderbooks

This dataset provides information on orderbooks of shipbuilding companies across the
glove. Information on contracts, completions and deliveries for seagoing vessels over
100GT are available at https://www.clarksons.net/wfr.
According to the world fleet register, in 2018, there were 496 shipyards (36 countries) with
more than one seagoing vessel (over 100GT) built.
2. ORBIS dataset: financial and ownership information

The ORBIS dataset is a cross-country longitudinal firm-level database available from
Bureau van Dijk (BvD). It is the largest cross-country firm-level that is available and
accessible for economic and financial research. It includes detailed financial information
and ownership links of millions of firms. The ORBIS version (2019-1) used in this report
is the one obtained by the OECD from BvD in 2020.
Given the lack of coverage of ORBIS ownership information, the analysis is complemented
through desk research aimed at checking whether the company is state-owned. Financial
information retrieved from ORBIS used in this report ranges from 2009 to 2017.

Endnotes
1
See C/WP6(2013)8, p. 12 and 23
2
For a practical example of the difference between ownership and control, see OECD, ‘’Economic
Survey Korea’’, 2018, 82-83.
3
In this analysis, the secretariat excludes pension funds and sovereign wealth funds that acquire stakes
in companies without the purpose of controlling them, but rather as an asset diversification strategy.
4
Calculations based on Clarkson’s Research Services Limited (2019), World Fleet Register,
https://www.clarksons.net/wfr. It includes all seagoing vessels from 100 GT.
5
Localisation of corporate headquarters
6
ORBIS has financial information for millions of firms; most listed firms and some significant non-listed firms.
Most of the top 177 companies are not listed on stock markets so a significant number of financial data of the
companies are missing in the ORBIS. The analysis is limited to companies for which financial data is made
available to ORBIS database. On average, 70 to 120 observations are available depending on each financial
indicator.
7
This ratio indicates how much profit was generated for each dollar of sale before deducting taxes. It is widely
used to compare the profitability of companies within the same industry.
8
It is defined as net income divided by total assets. It indicates the amount of earnings generated by a
given amount of capital (assets) and therefore the efficiency of capital employed.
9
It is a ratio between total debt (liabilities) and total assets, and indicates the percentage of a company’s
assets that have been financed through debt. Accordingly, it measures the degree of leverage of a firm
including both short-term and long-term debts.
10
It is a ratio between after tax net income and total debt (liabilities), and indicates the percentage of debt that can
be covered by income and therefore measures a firm’s ability to meet long term obligations. If the ratio is too low
(usually considered below 20%), there is a risk that a company might default.
11
For more information on the role that the Chinese state has played in China’s industrial policies, see
OECD, ‘’State-Owned Enterprises in the Development Process’’, 2015,
https://www.oecd.org/corporate/state-owned-enterprises-in-the-development-process-9789264229617-
en.htm, 137-163; S. Heilmann and L. Shih, ‘’The Rise of Industrial Policy in China, 1978-2012’’,
Harvard-Yenching Institute Working Paper Series 2013, 25p.
12
Q. Li, Ch. Lin and L. Xu, “Political Investment Cycles of State-Owned Enterprises”, The Review of
Financial Studies 2019, 3-4, 35-36.
13
Taken from OECD Business and Finance Outlook, ‘’Strengthening Trust in Business’’, 2019, 111.
14
Taken from OECD Corporate Governance Factbook 2019, 9.
In similar vein, K. Heo, ‘’Effects of Corporate Governance on the Performance of State-Owned
Enterprises’’, Policy Research Working Paper World Bank, 2018, no. 8555,
http://documents1.worldbank.org/curated/en/523421534424982014/pdf/WPS8555.pdf
15
See http://www.oecd.org/corporate/principles-corporate-governance/
16
SOE reform in China have a long history. The latest strategy on deepening SOE reforms was initiated
in 2015 and is still ongoing and will most likely be strengthened in 2020, https://www.china-
briefing.com/news/chinas-soe-reform-process/;
http://english.www.gov.cn/policies/latest_releases/2015/09/13/content_281475189210840.htm;
http://www.xinhuanet.com/english/2020-01/21/c_138724185.htm
17
S.T. Tan, ”Race in the Shipbuilding Industry: Cases of South Korea, Japan and China”, International
Journal of East Asia Studies 2017, 65: “In view of its importance, many countries have identified it as a
strategic industry in their national development plans.”
18
OECD, ‘’Competitive Neutrality. Maintaining a Level Playing Field Between Public and Private
Business’’, 2012, 17.
19
OECD Business and Finance Outlook, ‘’Strengthening Trust in Business’’, 2019, 103.

20
The Draft Recommendation on Competitive Neutrality defines competitive neutrality as ‘’A principle
according to which all enterprises are provided a level playing field with respect to a state’s (including
all bodies emanating from the state) ownership, regulation or activity in the market.’’ See OECD
document DAF/COMP/WP2(2020)2
21
See C/WP6(2013)8, para. 10
22
http://en.dsme.cn/gsjj.asp; http://www.chinadaily.com.cn/m/shandong/yantai/2015-
09/18/content_22152387.htm
23
https://www.fincantieri.com/en/media/press-releases/2018/fincantieri-extends-the-cooperation-with-china/
24
http://www.shig.com.cn/en/category-5.html; https://in.reuters.com/article/shandongheavy-
ferretti/update-3-chinese-group-takes-over-italian-yacht-maker-ferretti-idUSL6E8CA3EI20120110;
https://www.nytimes.com/2012/01/11/business/global/chinese-company-buys-italian-luxury-yacht-
maker.html; https://www.offshore-energy.biz/shandong-heavy-acquires-italian-luxury-yacht-maker-
ferretti-group/; https://www.wsj.com/articles/SB10000872396390444230504577616973186784312
25
https://deltamarin.com/2019/08/pre-conditional-voluntary-offer-deltamarin-parent-company-shares/;
https://lloydslist.maritimeintelligence.informa.com/LL036670/Aerospace-offshoot-eyes-yard-
acquisitions; http://avicintl-
cn.listedcompany.com/newsroom/20121012_180104_O2I_C9B235FAB6C2103B48257A950026C315.
1.pdf
26
http://www.miit.gov.cn/n1146295/n1652858/n1652930/n3757018/c3757369/content.html , para. 4.(2).1.
27
E.g. Dalian Cosco KHI Engineering Co. Ltd; Damen Yingchang Shipyard Co Ltd; Samsung Heavy
Industries Ningbo Co Ltd.
28
E.g. Hyundai and Shipbuilding Industry Corporation (Vietnam) or Korea Shipbuilding & Offshore
Engineering and Saudi Aramco.
29
https://thediplomat.com/2014/12/china-urges-companies-to-go-global/
30
In January 2020, the stakes by China Merchants were solds to the state-backed funds China Portugal
Cooperation Development Fund (led by China Development Bank) and the China-LAC Cooperation Fund (led
by China Exim Bank).
31
Figures from the China Global Investment Tracker, https://www.aei.org/china-global-investment-tracker/;
supplemented by international online sources.
32
K. P. Sauvant and M. D. Nolan, ‘’Reactions to China’s Cross-Border Investment and International
Investment Law’’ in M. Fuchs, S. Henn, M. Franz and R. Mudambi (eds.), Managing Culture and Interspace
in Cross-Border Investments, Routledge, 2017, 98-104.
33
M. Rithmire, ‘’Varieties of Outward Chinese Capital: Domestic Politics Status and Globalization of Chinese
Firms’’, Harvard Business School, Working Paper 20-009, 2019, 9-11.
34
For reference, the negotiations for a potential take-over are still ongoing.
35
https://www.reuters.com/article/us-philippines-hanjin-austal-cerberus-ca/austal-cerberus-team-up-to-eye-
hanjins-philippine-shipyard-idUSKBN1WO16B; https://asia.nikkei.com/Business/Business-deals/US-
investor-bids-to-keep-China-out-of-Philippine-shipyard
36
A privatised company is a company that used to be a State-Owned Enterprise
37
OECD, ‘’The Size and Sectoral Distribution of State-Owned Enterprises’’, 2017, 42; W. Leutert, ‘’State-
Owned Enterprises in Contemporary China’’ in L. Bernier, M. Florio and Ph. Bance (eds.), The Routledge
Handbook of State-Owned Enterprises, New York, Routledge, 2020, http://www.wendyleutert.com/research,
2.
See also the Global Fortune 500 list, https://fortune.com/global500/2020/search/
38
Note that the situation of CSIC is examined before its planned merger with CSSC.
39
For an overview of all central SOEs,
see http://www.sasac.gov.cn/n4422011/n14158800/n14158998/c14159097/content.html
40
CSIC took the 245th place in the Global Fortune 500 (2018), https://fortune.com/global500/2018/china-
shipbuilding-industry/
41
For more information about this company, see https://www.qixin.com/company/edce69dd-a470-41af-
80ee-55c1da81bf31?section=partners and https://www.qixin.com/article/7f6d6723-c8c2-4071-9204-
135d4984d707

42
https://www.bloomberg.com/profile/company/CSIZ:CH; https://fortune.com/global500/2019/china-
shipbuilding-industry/
43
W. Leutert, ‘’Challenges Ahead in China’s Reform of State-Owned Enterprises’’, Asia Policy 2016, 87.
44
http://www.csic.com.cn/n5/n18/c17964/content.html. For more information about the ‘’A-label’’ category,
see http://www.sasac.gov.cn/n4470048/n13461446/n15140232/n15140242/c15170188/content.html
45
National champions can be defined as ‘’companies which help further the government’s strategic aims and
in return, the government supports these companies by providing easier access to financing, giving preference
in government contract bidding, and sometimes oligarchy or monopoly status in protected industries, giving
these companies a number of advantages over their competitors.’’,
https://www.foreignpolicyjournal.com/2017/05/15/chinas-national-champions-state-support-makes-chinese-
companies-dominant/
46
C.J. Milhaupt and M. Pargendler, “Governance Challenges of Listed State-Owned Enterprises Around the
World: National Experiences and a Framework for Reform”, Cornell International Law Journal 2017, 526.
47
See for instance the visit by SASAC of Dalian Shipbuilding (part of CSIC) in 2017, where one of the
executives of Dalian Shipbuilding proclaimed that he ‘’hopes the State-owned Assets Supervision and
Administration Commission can call for relevant national ministries and commissions to continually furnish
related policy support to DSIC.’’, http://www.dsic.cn/home/xwzxen/jtxwen/324513.htm
48
For an overview of the leadership structure of the Chinese Communist Party, see The US-China Business
Council, ‘’China’s 2017 Communist Party Leadership Structure & Transition’’, 2017,
https://www.uschina.org/sites/default/files/LeadershipReport.pdf and L. Gore, ‘’the Communist Party-
Dominated Governance Model of China: Legitimacy, Accountability and Meritocracy’’, the Journal of the
Northeastern Political Science Association 2019, 161 - 194.
For an overview of the key players of the Communist Party per institution,
see http://www.chinavitae.org/search/main.php. Note that this website is not always up to date.
49
See for instance the party school of DSIC (part of CSSC)
http://www.dsic.cn/home/xwzxen/jtxwen/325166.htm
50
‘’The CCP’s nomenklatura system can be defined as a set of rules which establish the lists of leading
personnel positions across various institutional spheres, such as government, industry, finance and education,
over which various levels of Party committees exercise control.’’, Ch. Li, ‘’Holding ‘’China Inc.’’ Together:
the CCP and the Rise of China’s Yangqi’’, The China Quarterly 2016, 937.
51
Mr. Liu for instance held office as Deputy Director of SASAC before joining CSIC in 2011.
52
See for instance the speech of Pan Yaoliang, Deputy Secretary of the Party Committee and Secretary of the
Disciplinary Committee of CSIC, at a 2018 meeting: ‘’Leading cadres must, through continuous learning,
improve their ideological and political accomplishments, increase their own knowledge and talents, and firm
their correct political beliefs. We must use Xi Jinping’s socialist ideology with Chinese characteristics as a
guide to thoroughly study and implement the important speeches of General Secretary Xi Jinping’s series of
speeches, learn and think, learn and believe, and learn to use them.’’, http://en.csiem.com/content-14-17-
1.html
53
K.E. Brodsgaard, “Politics and Business Group Formation in China: the Party in Control?”, The China
Quarterly 2012, 635; W. Leutert, “Firm Control: Governing the State-Owned Economy Under Xi Jinping”,
China Perspectives 2018, 28; Ch. Li, ‘’Holding ‘’China Inc.’’ Together: the CCP and the Rise of China’s
Yangqi’’, The China Quarterly 2016, 936-944.
54
http://www.csic.com.cn/n5/n18/c18710/content.html
55
For an English version of the Chinese Communist Party’s Constitution,
see http://www.xinhuanet.com//english/download/Constitution_of_the_Communist_Party_of_China.pdf:
“The leading Party members groups or Party committees of state-owned enterprises shall play a leadership
role, set the right direction, keep in mind the big picture, ensure the implementation of Party policies and
principles, and discuss and decide on major issues of their enterprise in accordance with regulations. (…)
Primary-level Party organizations shall guarantee and oversee the implementation of the principles and
policies of the Party and the state within their own enterprise and shall support the board of shareholders,
board of directors, board of supervisors, and manager (or factory director) in exercising their functions and
powers in accordance with the law.”
56
W. Leutert, ‘’The Political Mobility of China’s Central State-Owned Enterprise Leaders’’, The China
Quarterly 2018, 12; Lin, The China Quarterly 2017, 116-118.

57
https://www.rivieramm.com/news-content-hub/news-content-hub/chinese-merger-births-worlds-
largest-shipping-firm-56965; https://www.maritime-executive.com/article/shipbuilders-csic-and-cssc-
deny-merger-speculations
58
CPC Central Committee, ‘’Opinions on Consolidating and Deepening the Educational Achievements
on the Theme of ‘’Don’t Forget Your Orignal Heart, Keep Your Mission in Mind’’,
http://www.gov.cn/zhengce/2020-09/14/content_5543377.htm; F. Russo, ‘’Politics in the Boardroom:
The Role of Chinese Communist Party Committees’’, 2019, https://thediplomat.com/2019/12/politics-in-
the-boardroom-the-role-of-chinese-communist-party-committees/;
https://www.scmp.com/economy/china-economy/article/3045053/china-cements-communist-partys-
role-top-its-soes-should;
https://www.chinadaily.com.cn/a/201911/30/WS5de1572ca310cf3e3557b0cf.html;
https://www.bloomberg.com/news/articles/2020-01-08/china-steps-up-communist-party-control-in-
state-owned-firms
59
W. Leutert, ‘’State-Owned Enterprises in Contemporary China’’ in L. Bernier, M. Florio and Ph. Bance
(eds.), The Routledge Handbook of State-Owned Enterprises, New York, Routledge, 2020,
http://www.wendyleutert.com/research, 10-11.
See also section 2.(5).1. Guiding Opinions of the General Office of the State Council on Further Improving the
Corporate Governance Structure of State-owned Enterprises, Guo Ban Fa [2017], No. 36,
http://www.gov.cn/zhengce/content/2017-05/03/content_5190599.htm
See also section 3.(1) and (5) of the Special Report of the State Council on the Management of State-Owned
Assets of Enterprises Under the Supervision of State-Owned Assets System in 2019, 2020,
http://www.npc.gov.cn/npc/c30834/202010/92861cc1660044d0b4c1511083bab902.shtml.
60
Cfr. SASAC, ‘’Notice on the Issuing the Implementation Opinions on Deepening the Internal Audit and
Supervision of Central Enterprises’’, 2020, no. 6,
http://www.sasac.gov.cn/n2588030/n2588959/c15661368/content.html
Cfr. National Audit Office of China, ‘’Provisions on Auditing the Economic Responsibilities of the Main
Leading Cadres of the Party and Government and the Main Leading Personnel of State-Owned Enterprises and
Institutions’’, 2019, http://www.audit.gov.cn/n6/n36/c133406/content.html and articles 13-16 of its Detailed
Rules for the Implementation of these rules, http://www.audit.gov.cn/n6/n36/c132978/content.html
For an example of an audit of CSIC in 2011,
see http://www.audit.gov.cn/en/n746/n752/n767/c66605/part/30362.pdf
For an example of an audit of CSSC in 2015, see http://www.audit.gov.cn/n11/n536/n537/c97731/content.html
61
Cfr. Central Committee of the Chinese Communist Party, ‘’Work Rules for the Supervision and Enforcement
of Discipline by the Disciplinary Inspection Organs of the Communist Party of China’’, 2019,
http://www.audit.gov.cn/n6/n36/c129887/content.html
62
W. Leutert, “Firm Control: Governing the State-Owned Economy Under Xi Jinping”, China Perspectives
2018, 33.
63
For an example, see the meeting of SASAC intending to encourage world class management practices for
key SOEs, http://www.csic.com.cn/n5/n20/c18466/content.html and
http://www.sasac.gov.cn/n2588030/n2588924/c15388379/content.html
64
https://www.economist.com/briefing/2020/08/15/xi-jinping-is-trying-to-remake-the-chinese-economy
65
L. Yu-Hsin Lin and C.J. Milhaupt, “Party Building or Noisy Signaling? The Contours of Political
Conformity in Chinese Corporate Governance”, European Corporate Governance Institute, Working Paper No.
493/2020, 1. In similar vein: W. Leutert, ‘’State-Owned Enterprises in Contemporary China’’ in L. Bernier,
M. Florio and Ph. Bance (eds.), The Routledge Handbook of State-Owned Enterprises, New York, Routledge,
2020, http://www.wendyleutert.com/research, 11-12 and W. Zhou, H. Gao and X. Bai, ‘’Building a Market
Economy Through WTO-Inspired Reform of State-Owned Enterprises in China’’, International and
Comparative Law Quarterly 2019, 982.
66
https://www.oecd-ilibrary.org/governance/g20-oecd-principles-of-corporate-governance-
2015_9789264236882-en
67
W. Leutert, “Firm Control: Governing the State-Owned Economy under Xi Jinping”, China Perspectives
2018, 35; https://www.tradewindsnews.com/shipyards/csic-chairman-hu-retires-ahead-of-merger-between-
chinese-shipbuilding-giants/2-1-666120

This practice is in line with section 2.5.3 of the Guiding Opinions of the General Office of the State Council
on Further Improving the Corporate Governance Structure of State-owned Enterprises, Guo Ban Fa [2017],
No. 36, http://www.gov.cn/zhengce/content/2017-05/03/content_5190599.htm.
68
http://www.dsic.cn/home/xwzxen/mtjjen/324918.htm and
http://www.shgsic.com/home/xwzxen/320633.htm
69
In the same line: http://www.csic.com.cn/n5/n20/c16064/content.html
70
For a trial version of the Regulations, see http://www.csic.com.cn/n6/n27/c16000/content.html
71
72
See preamble of the trial Regulations, http://www.csic.com.cn/n6/n27/c16000/content.html
73
See Central Committee of the Communist Party, ‘’Party Committee Regulations on the Implementation of
the Party’s Responsibility for Strictly Governing the Subject of the Party’’, 2020,
http://www.cssc.net.cn/n6/n27/c16482/content.html and the newly established Party Group Theory Learning
Centre, which intends to study Xi Jinping’s speeches and instructions,
http://www.cssc.net.cn/n6/n27/c16508/content.html
For a few recent examples of study sessions, see http://www.csic.com.cn/n5/n18/c18755/content.html;
74
For a recent example of such an inspection (March 2020) at CSSC, see
http://www.cssc.net.cn/n5/n18/c16522/content.html
75
76
77
78
http://www.miit.gov.cn/n1146290/n1146402/n7039597/c7444232/content.html
79
Report of the Party Leadership Group of China Shipbuilding Corporation Limited during the Third Round
of the 19th Central Inspection Tour, March 2020, http://www.cssc.net.cn/n5/n18/c16522/content.html, notably
annex 2.
80
81
See MIIT, ‘’12th Five-Year Implementation Plan for the Shipbuilding Sector (2011-2015)’’, published in
2012, http://www.miit.gov.cn/n1146295/n1652858/n1652930/n3757018/c3757369/content.html, last
paragraph of the document.
82
See the principle ‘’Establish ownership arrangements that are conducive to integrity’’, OECD
Recommendation of the Council on Guidelines on Anti-Corruption and Integrity in State-Owned Enterprises
(2019), C/MIN(2019)5/FINAL.
83
See in particular principle 4 (Act as an informed and active owner with regards to integrity in SOEs), G20
High-Level Principles for Preventing Corruption and Ensuring Integrity in State-Owned Enterprises (2018),
http://www.g20.utoronto.ca/2018/final_hlps_on_soes.pdf
84
CSIC, ‘’Corporate Social Responsibility Report’’, 2018,
http://www.csic.com.cn/n8/n57/c8308/part/9784.pdf, 3: ‘’Taking mastering and earnestly practicing Xi
Jinping Thought on Socialism with Chinese Characteristics for a New Era and the guiding principles of the
19th CPC National Congress as our primary political mission while attaching equal importance to
implementing President Xi’s instructions, we maintained political integrity, thought in terms of the big picture,
followed the leadership core, and kept in alignment with the central Party leadership, had full confidence in
the path, theory, system, and culture of socialism with Chinese characteristics, and remained firmly
safeguarding Xi’s status as the core of the CPC Central Committee and the whole Party, as well as the authority
and centralized, unified leadership of the CPC Central Committee, all of which also was integrated into our
work contents of comprehensive Party building, focus on our strategic positioning and pooling our strengths
for revitalizing CSIC with advanced equipment.’’
85
This term was inserted in the Constitution of the Chinese Communist Party (see
http://www.xinhuanet.com//english/download/Constitution_of_the_Communist_Party_of_China.pdf) after
the 19th National Congress of the Communist Party of China,
(http://english.mee.gov.cn/News_service/media_news/201711/P020171106321601996894.pdf). In essence, it
refers to Xi Jinping’s vision and ideology for the future development of China. It includes several aspects such
as the building of a moderately prosperous society; a people-centered philosophy of development to promote

well-rounded human development and common prosperity for everyone; to establish a socialist rule of law;
and to foster a new type of international relations to build a community with a shared future of mankind.
86
https://www.oecd-ilibrary.org/governance/g20-oecd-principles-of-corporate-governance-
2015_9789264236882-en
87
See for instance the 2019 statement by the American CEO-led association Business Roundtable, which
reconfigures the purpose of a corporation to include investments in employees, to generate long-term value for
its stakeholders, https://opportunity.businessroundtable.org/ourcommitment/.
88
Group Brochure Yanzijiang Shipbuilding (2017), http://www.yzjship.com/upload/doc/20170428.pdf, 3.
89
See https://www.sgx.com/securities/company-
announcements?value=YANGZIJIANG%20SHIPBUILDING%20(HOLDINGS)%20LTD.&type=company
90
Corporate Presentation Yangzijang Shipbuilding February 2020, http://yangzijiang-
cn.listedcompany.com/newsroom/20200228_003410_NULL_LXHBC06SQ1VBTIDX.3.pdf
91
https://lloydslist.maritimeintelligence.informa.com/LL1128622/YangzijiangMitsui-JV-shipyard-starts-
operation; https://www.mes.co.jp/english/press/2018/1011_001111.html
92
Annual Report 2018,
http://www.yzjship.com/upload/doc/2018%E5%B9%B4%E5%B9%B4%E6%8A%A5.pdf, 6.
93
Jiangsu New Times Shipbuilding for instance also incorporated a Party Committee, which aims to
implement Chinese policies, http://www.ncship.com.cn/html/670543649.html;
http://www.ncship.com.cn/html/8452013550.html
See also Ch. Bai, Ch. Hsieh, and Z. Song, ‘’Special Deals with Chinese Characteristics’’, NBER
Macroeconomics Annual 2019, 360-362; L. Yu-Hsin Lin and C.J. Milhaupt, “Party Building or Noisy
Signaling? The Contours of Political Conformity in Chinese Corporate Governance”, European Corporate
Governance Institute, Working Paper No. 493/2020, 22-23; M. Rithmire, ‘’Varieties of Outward Chinese
Capital: Domestic Politics Status and Globalization of Chinese Firms’’, Harvard Business School, Working
Paper 20-009, 2019, 7-8.
94
J. Milhaupt and W. Zheng, ‘’Beyond Ownership: State Capitalism and the Chinese Firm’’, The Georgetown
Law Journal 2015, 668, 700-702 and 704; M. Rithmire, ‘’Varieties of Outward Chinese Capital: Domestic
Politics Status and Globalization of Chinese Firms’’, Harvard Business School, Working Paper 20-009, 2019,
8.
95
Center for Strategic and International Studies (CSIS), ‘’Hidden Harbors: China’s State-Backed Shipping
Industry’’, 2020, https://www.csis.org/analysis/hidden-harbors-chinas-state-backed-shipping-industry
96
Annual Report 2018,
http://www.yzjship.com/upload/doc/2018%E5%B9%B4%E5%B9%B4%E6%8A%A5.pdf, 27 and 29.
97
See P.M. Thornton, ‘’the New Life of the Party: Party-Building and Social Engineering in Greater
Shanghai’’, the China Journal 2012, 61 and 65-66.
98
See also, CPC Central Committee, ‘’Opinions on Strengthening the United Front Work of Private
Economy in the New Era’’, 2020, http://www.gov.cn/zhengce/2020-09/15/content_5543685.htm; S.
Livingston, ‘’The Chinese Communist Party Targets the Private Sector’’, 2020,
https://www.csis.org/analysis/chinese-communist-party-targets-private-sector;
https://www.bloomberg.com/news/articles/2020-09-16/chinese-communist-party-wants-stronger-role-
in-private-sector; https://www.ft.com/content/582411f6-fc3b-4e4d-9916-c30a29ad010e;
https://www.nytimes.com/2020/09/17/business/china-communist-private-business.html;
https://www.wsj.com/articles/china-xi-clampdown-private-sector-communist-party-11607612531
99
Cfr. Yangzijiang Shipbuilding, Sustainability Report 2018,
https://links.sgx.com/FileOpen/Yangzijiang_SR_FY2018.ashx?App=Announcement&FileID=561430, 17
and cfr. http://en.hailukj.com/news/17.html.
100
https://www.theguardian.com/world/2019/jul/25/china-business-xi-jinping-communist-party-state-private-
enterprise-huawei; https://www.tradewindsnews.com/finance/communist-party-picks-its-winners-to-carry-
flag-at-home-and-abroad/2-1-330431; https://www.scmp.com/economy/china-
economy/article/2174811/chinese-communist-party-needs-curtail-its-presence-private
101
Law Journal 2015, 694-696; https://thediplomat.com/2019/12/politics-in-the-boardroom-the-role-of-chinese-
communist-party-committees/

102
Law Journal 2015, 697-699.
103
http://www.yzjship.com/en/about.asp?sid=2
104
Annual Report 2018,
http://www.yzjship.com/upload/doc/2018%E5%B9%B4%E5%B9%B4%E6%8A%A5.pdf, 12, 20 and 22.
105
Yangzijiang Shipbuilding, Corporate Presentation April 2018, http://yangzijiang-
cn.listedcompany.com/newsroom/20180426_215726_NULL_192DUO2GIQTFARGF.2.pdf, 11.
106
https://www.seatrade-maritime.com/shipbuilding/yangzijiang-shipbuilding-bolstered-tiger-group-orders-
worth-115bn; https://splash247.com/yangzijiang-shipbuilding-acquires-remaining-stake-in-huayuan-
logistics/; https://lloydslist.maritimeintelligence.informa.com/LL1131393/Tiger-Group-linked-with-large-
boxship-order-at-Yangzijiang
107
https://www.tradewindsnews.com/twplus/ren-le-tian-rebuilding-yangzijiang-his-way/2-1-875253
108
Cfr. P.J. Barwick, M. Kalouptsidi and N.B. Zahur, ‘’China’s Industrial Policy: an Empirical Evaluation’’,
2019, https://barwick.economics.cornell.edu/Yr19_ChinaShipyard_BKZ.pdf
109
CSIC Annual Report 2018.
110
https://lloydslist.maritimeintelligence.informa.com/LL1128922/Bocomm-Leasing-behind-VLOC-brace-
at-Yangzijiang; https://lloydslist.maritimeintelligence.informa.com/LL1129057/Yangzijiang-secures-more-
Bocomm-Leasinglinked-VLOC-orders; https://www.seatrade-maritime.com/asia/yangzijiang-confirms-order-
six-vlocs-icbc-leasing; https://www.tradewindsnews.com/dry-cargo/yangzijiang-puts-pen-to-paper-for-icbc-
vlocs/1-1-391679; https://www.icbcleasing.com/node/125
110
https://www.tradewindsnews.com/ship-sales/ren-yuan-pushes-for-end-to-state-subsidies-to-chinese-
shipbuilders/2-1-201545
111
https://lloydslist.maritimeintelligence.informa.com/LL1122217/The-Interview-Ren-Yuanlin;
https://lloydslist.maritimeintelligence.informa.com/LL1121146/Yard-Talk--Will-Chinas-shipbuilding-
bailout-lead-to-capacity-cut. https://www.seatrade-maritime.com/asia/yangzijiang-confirms-order-six-vlocs-
icbc-leasing; https://www.tradewindsnews.com/dry-cargo/yangzijiang-puts-pen-to-paper-for-icbc-vlocs/1-1-
391679; https://www.icbcleasing.com/node/125
112
https://www.tradewindsnews.com/ship-sales/ren-yuan-pushes-for-end-to-state-subsidies-to-chinese-
shipbuilders/2-1-201545
113
Center for Strategic and International Studies (CSIS), ‘’Hidden Harbors: China’s State-Backed Shipping
Industry’’, 2020, https://www.csis.org/analysis/hidden-harbors-chinas-state-backed-shipping-industry
114
Cfr. OECD report on shipbuilding in China, 2020.
115
Law Journal 2015, 700-702 and 705.
116
https://lloydslist.maritimeintelligence.informa.com/LL1122553/Chinas-Ouhua-Shipbuilding-files-for-
bankruptcy; https://www.wsj.com/articles/chinas-shipbuilders-go-from-boom-to-rust-1486552896;
https://www.economist.com/business/2013/07/13/too-sick-to-sail;
http://www.globaltimes.cn/content/939953.shtml; https://www.ft.com/content/c1e062ae-c79e-11e4-8e1f-
00144feab7de; https://splash247.com/taizhou-kouan-shipbuilding-enters-court-led-restructuring/;
https://www.xindemarinenews.com/m/view.php?aid=1211
117
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STATE-OWNED

OECD SCIENCE, TECHNOLOGY AND INDUSTRY POLICY PAPERS

State-owned enterprises in the shipbuilding sector

Laurent Daniel, Changhoon Lee, Pieter Parmentier

Keywords : Shipbuilding, State-owned enterprises, Industrial policy

OECD SCIENCE, TECHNOLOGY AND INDUSTRY POLICY PAPERS

1. Executive Summary .......................................................................................................................... 5

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OECD SCIENCE, TECHNOLOGY AND INDUSTRY POLICY PAPERS

OECD SCIENCE, TECHNOLOGY AND INDUSTRY POLICY PAPERS

3. State-owned enterprises in the shipbuilding sector: overview and economic

3.1. Overview of SOEs in the shipbuilding sector

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Source: OECD Secretariat based on data from Clarksons.

Figure 2. Ship completions of shipbuilding SOEs by selected regions in 2018

Source: OECD Secretariat based on data from Clarksons.

OECD SCIENCE, TECHNOLOGY AND INDUSTRY POLICY PAPERS

Figure 3. Number and ship completions of shipbuilding SOEs in the OECD

(a) Number of SOEs (b) Completions in millions of CGT of SOEs in 2018

Source: OECD Secretariat based on data from Clarksons.

3.2. Economic Performance

Sales and employment

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Figure 4. Average sales and employment by ownership type, 2009-2017

Source: OECD calculations based on data from ORBIS.

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Source: OECD calculations based on data from ORBIS.

OECD SCIENCE, TECHNOLOGY AND INDUSTRY POLICY PAPERS

Figure 6. Profitability indicators by ownership type

Source: OECD calculations based on data from ORBIS.

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Figure 7. Indebtedness indicators by ownership type

Source: OECD calculations based on data from ORBIS.

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4. Policies impacting SOEs

4.1. OECD instruments: short overview

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Box 1. Competitive neutrality

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4.2. Cross-border investments

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Communications Construction in the Mozambiqian branch of Vale (2013); the investment

4.3. Case-study: State-owned enterprise v. privately-owned enterprise in China

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Figure 8. China’ share in terms of ship completions of largest shipbuilding SOEs

In millions of CGT, in 2018

Therefore, reference is made to a Chinese case-study. The China Shipbuilding Industry

4.3.1. State-Owned Enterprise: China Shipbuilding Industry Corporation (CSIC)

OECD SCIENCE, TECHNOLOGY AND INDUSTRY POLICY PAPERS

Figure 9. CSIC corporate structure

Source: Based on CSIC Ltd., CSR Report 2019, http://www.csicl.com.cn/n358/n362/c16936/part/16572.pdf and

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Corporate governance framework of China’s central SOEs

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Corporate governance in CSIC

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• strengthening the party’s leadership of state-owned enterprises (art. 1),

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4.3.2. Privately-Owned Enterprise: Yangzijiang Shipbuilding