In 2012, Chinese shipbuilding industry saw all three indexes drop and experienced severe recessions where almost 300 companies slipped into the red. While market players expect this downturn to continue over the next couple of years, mergers and acquisitions (M&A) have appeared to be a possible solution, however, come to a deadlock of Chinese local governments’ policy to provide protection umbrellas for local companies.
Industrial professionals said that there has been a significant structural change in shipbuilding and related industries around the world after the global financial crisis. China saw a sharp decrease in demands for general merchant ship which is a major vessel type of Chinese yards, such as bulker and etc., and the market share of high-value vessels, very large containership, LNG carrier and so on, has notably increased that China’s shipbuilding and related corporations got to experience a deeper depression due to a lack of investment in R&D.  
Thus, for the Chinese corporations to get out of this crisis, the professionals expect mergers and acquisitions among companies to play a key role since a better company will lead a poor one. Also, the Ministry of Industry and Information Technology of China and other eleven ministries jointly released an “opinion on mergers and acquisitions among major companies in the industry” that the issue regarding M&A has surfaced.
Back in 2010, the State Council of China put forward an opinion for M&A among companies and proposals on the issue were suggested for several times in the industry, however, the plans did not come to a settlement. The industry has blamed local governments’ protectionism to be the biggest obstacle.
Shipbuilding and related industries have been the driving force behind the development of industry in extensive sectors and created job opportunities directly and indirectly as being a technology, capital and labor-intensive industry, having also affected on GDP of local governments. The related companies concentrating in coastal cities have played a key role in the development of the cities and brought benefits to productive value and tax revenue increases.
Under this situation, when mergers and acquisitions are actively proceeded in shipbuilding and related corporations, no wonder the fiscal revenue of local governments will be influenced. Thus, the local governments have a negative view on the M&A and prefer to a temporary expedient such as encouraging loans from banks and etc.
Currently, M&A cannot be proceeded properly due to the government’s interruption when it must be led and conducted by the market. Chinese industry is said to be stressing that in order for shipbuilding industry to progress normally, protectionism of local governments must be withdrawn while M&A to be accelerated.