China's increasingly sophisticated heavy transport industries are finding markets abroad.

By MARK GODFREY

When the world's merchants want to buy a ship, they come increasingly to China. Traditional powerhouses of heavy transport machines like northern Europe, South Korea and the USA are increasingly losing ground to China, which has begun to export trains as well as ships to Africa, the Middle East and now western countries. "The growth in China has been astonishing," Mauricio Botelho, chief executive of Brazilian aircraft maker Embraer, said in Sao Paulo recently, announcing that Embraer would invest US $26 million in a joint-venture factory in China's Heilongjiang province to build corporate jets. Embraer, said Botelho, expects that China will need 650 small and medium-sized aircraft over the next 20 years, and is battling with rivals Bombardier and Gulfstream for a piece of the private jet market in China. A GDP growth rate of nearly 10 percent per year has created wealth enough for Chinese businesspeople and corporations to afford their own jets.

China needs airplanes but this export-oriented country also needs ships to clear its factory floors. China is quickly becoming the world's largest producer of cargo ships and is likely to overtake South Korea to become the world's largest shipmaker in 20 years. Neighbors Japan and South Korea lead China in technology, however, and China will have to improve its technology and output capacity to reach its own target of becoming the world's number one shipmaker. Chinese shipbuilders are expected to produce 15.2 million tons of ships annually between 2025 and 2030, accounting for 40 percent of the world's total output, according to a study released earlier this year by Shipbuilding Economy Research Center of China.

In the late 1980s and early 1990s China's shipyards turned out simple container vessels and bulk carriers. Now, China is winning orders for sophisticated liquefied-natural-gas carriers. According to state media reports, China State Shipbuilding Corporation (CSSC) built 69 ships in 2002, including a huge crude-oil carrier constructed for the Iranian government. CSSC last year earned almost US$1.5 billion making ships to mostly foreign specifications, and strong demand from European ship owners this year has generated still more orders.

Every year the Waigaoqiao shipyard near Shanghai floats 200,000-tonne bulk carriers off its production lines and sails them up the Yangtze River. This is the CSSC's state-of-the-art shipyard, opened in late 2001. Guided by current trends, industry experts believe that China will be the world's biggest shipbuilder within two decades. An inexhaustible pool of cheap labor gives its shipbuilding industry the competitive edge.

Meanwhile, the skies over Shanghai's increasing number of local tycoons are proving a lucrative market for helicopter makers. In 2000 the Chinese government loosened regulations to allow local private firms and foreign companies to cooperate in designing and making civil helicopters. Since the 1990s the Chinese helicopter industry, centered mainly around Harbin Aircraft Industry Co. and Changhe Aircraft Industry Co. has begun to spend larger sums on research and development in order to meet China's future demand with locally manufactured helicopters. China's government is spending heavily on bringing international expertise into the country's aeronautics field. Both the Harbin and Changhe companies, each of them state owned, have been doing business with European and U.S. helicopter makers. The EC 120 lightweight helicopter, for example -- a collaborative venture by French firm Eurocopter, Harbin Aircraft Industry and Singapore Aerospace Co. -- has been under development since the mid-1990s. Changhe Aircraft Industry, meanwhile, has been building a version of the Sikorsky S-92 medium transport helicopter in collaboration with French partners. Chinese commercial helicopters currently being constructed with Western parts and expertise are expected to take to the skies between 2005 and 2007.

China's less high-flying but most spectacular success in heavy transport has been rail-based, in the manufacture and export of trains. In addition to supplying its own huge transport needs, China now exports its trains to both developed and developing nations. In the early 1990s Heilongjiang's Qiqihar Locomotive (Group) sold almost 600 freight trains to Botswana, Myanmar and Nigeria. The company's market extended to developed nations in the late 1990s, when its freight trains were sold to Australia.

Foreign expertise has been crucial to China's burgeoning train-making industry. Chinese-made trains manufactured through a joint venture between Changchun Automobile Corporation in northeast China's Jilin Province and German-based Bombardier Transportation now service Metro Line 2 in Guangzhou. This is China's first domestically produced subway train. "The successful production of the first group of trains marks China's move into a new era in the metro manufacturing sector, reaching international standards," said Lu Guanglin, general manager of Guangzhou Metro Corporation. A total 156 trains from Changchun and from Bombadier factory in Germany will go into service on Metro Line 2. In June, meanwhile, Chinese-made subway trains began operation in the Iranian capital Tehran, running on the city's new subway line. Tehran chose Chinese trains because they were cheaper, said a Tehran municipal government spokesperson. "European exporters were asking 3.5 billion dollars for the wagons while the Chinese invoice was closer to 702 million." Meanwhile, in August this year, Zimbabwean government officials announced that the southern African country intends to import Chinese-made railway wagons and locomotives, though a firm deal is yet to be finalized.

International demand for new ships, meanwhile, has recovered from a sharp downturn in late 2001, and China's shipyards are working furiously to move more ships onto the water. In a June research report, Japanese brokerage Nomura estimated that China was only a decade away from catching up with the quality and output of South Korea's shipyards. The acknowledged headquarters of China's maritime industry, Shanghai already boasts the world's fourth-largest container port. A big merchant fleet and a powerful navy could be Beijing's formula to expand China's global reach, following the lead of Britain and the United States whose navies have proved crucial to the course of history in past centuries. Beijing's massive investment in new shipyards would indicate that shipbuilding prowess is a national priority. Late last year CSSC announced that it will spend US$3.6 billion on building what it claims will be the world's biggest shipyard on Changxing Island outside Shanghai. The new yard, CSSC General Manager Chen Xiaojin announced to state media, will boost the company's shipbuilding capacity fourfold by 2015, making China the world's largest shipbuilder.

Whatever the success abroad, the greatest potential for China's planes and trains is in its booming local market. Lack of airport infrastructure and high domestic landing fees have been obstacles to the expansion of the private air transport sector. But some restrictions are slowly being eased, and private estimates put China's business jet market at over US$9 billion within 10 years. "There are more private jets in the greater Los Angeles area than in the whole of China at the moment, but we expect it to be fast-growing," said David Dixon, Asia Pacific vice president for regional jet maker Bombardier Aerospace. China's huge government subventions for its shipbuilding industry could draw ire from fellow World Trade Organization (WTO) members. The EU has already complained to the WTO about Korean and Japanese shipyards' assistance from government coffers. Shipmakers meanwhile steam ahead, but in the absence of the cutting-edge technology employed by Korean and Japanese competitors, China's seafaring ambitions could hit choppy waters.