Where the Chinese Luxury Consumer Lives

No. of millionaires* Beijing Guangdong Shanghai Zhejiang Jiangsu Fujian Shandong Liaoning Sichuan Henan Others Total 170,000 157,000 132,000 126,000 68,000 36,000 33,000 29,000 24,000 16,500 168,500 960,000 % 17.7% 16.4% 13.8% 13.1% 7.1% 3.8% 3.4% 3.0% 2.5% 1.7% 17.6% 100.0%

* Individuals in China with personal wealth of 10 million Yuan or more

In this context it should be remembered that only certain countries can be defined as "emerging markets for luxury yachts": Russia, China, India and the United Arab Emirates. In conclusion, the Chinese market shows all the potential signs for development of a yachting market, especially in the upper range, but this will only be possible when a series of objective conditions are concretely developed (port structures, regulations etc.) as well as proper consumer education, the latter being necessary for effective development of the potential market. General understanding of yachts and private jets among the rich and super rich is very low but expectations for these markets is high. Qingdao and Hong Kong are preferred places for berthing yachts. Hurun wealth Report http://www.hurun.net/hurun/listreleaseen427.aspx ( the rich and super rich trends)

th China Shipbuilding Holdings (HK) Ltd. (SCS for short), an experienced vessel developer in Hong Kong, is founded subsequent to its exclusive acquisition of an originally Chinese state-owned shipyard (established in 1958). Combining the professional qualities of shareholders with the shipbuilding competence of the former shipyard, SCS has become one of the most competitive and internationally-renowned modern vessel enterprises in China. For the structural frame of SCS, please refer to the SCS Main Structural Frame Guide.

The headquarter of SCS, the South China Marine Ltd. (SCS-HK), is located in Hong Kong and engages in ship business & marketing affairs, which includes taking up new shipbuilding orders for all different sorts of vessels, marine equipment and ocean offshore installations from worldwide, and also the sale of newly-built vessels that are manufactured by our shipyard, the South China Shipyard (SCS-JM). South China Shipyard (SCS-JM) is located at Xinhui District, Jiangmen City, Guangdong Province, China and is approximately 80 nautical miles away from Hong Kong. It occupies a land area of over 130,000M . Equipped with advanced and complete special shipbuilding facilities, the dominating business of SCS-JM is the construction, maintenance, renovation and upgrade of vessels, ocean offshore installations and associated facilities. SCS has established Ship Design and Research Institute (SCS-DR) in Guangzhou, China, which is responsible for the classification technical design of new vessels and Ship Technical Research Institute
2

in shipyard that takes charge of the shipbuilding technological design and provides professional technical supports. SCS also possesses an overseas base in Singapore which is in charge of offshore services and ocean-going operation fleets as well as provides offshore support services, ocean-going towage services and ship chartering services to global clients.

China super rich set to propel luxury yacht sales

By Kelvin Chan, Associated Press
Updated 5/14/2011 2:53 PM |

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HONG KONG With their sleek, modern lines and polished finish, the two yachts built by Samuel Wong's shipyard fit right in among the multimillion-dollar floating palaces moored at a tony Hong Kong yacht club.

Kin Cheung, AP

Staff members take pictures on the Chinese-made yacht Accelera 83 at a boat show in Hong Kong on May 6, 2011.
Kin Cheung, AP

Staff members take pictures on the Chinese-made yacht Accelera 83 at a boat show in Hong Kong on May 6, 2011.

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Onboard, a disco ball, karaoke system and garish neon blue accent lighting in the living quarters are hints that the vessel is aimed at the luxury yacht industry's newest growth market: wealthy Chinese.

Yacht makers are hoping they will be the latest to benefit from China's booming economy, which is creating a growing class of wealthy tycoons splurging on luxury lifestyle pursuits. Rich Chinese are already known for spending lavish sums of money on flashy apartments, designer labels such as Louis Vuitton and high-end cars such as Porsches and Rolls-Royces. "People in China first will buy houses. Then cars. Then the next step will be the yacht industry," Wong said hopefully at a recent boat expo in Hong Kong. His family-owned shipyard located in Zhuhai, across the border from Macau in mainland China, has been building fishing and house boats for 40 years. PHOTO: Gallery: Superyachts in Asia Two years ago, it expanded into luxury yachts under the Accelera brand, a name chosen for its vaguely European sound. That illustrates another recent trend: Chinese companies are expanding into high-end boatbuilding, a field traditionally dominated by the Americans and Europeans. But in Wong's favor are high import duties for foreign yachts, part of China's strategy to help companies in a range of industries develop into global competitors. About 20 companies in China, including 11 backed by foreign investment, are producing superyachts, which some define as longer than 80 feet. Hong Kong-based Kingship Marine is building a 144-footer at its yard in Zhongshan in China's southern Guangdong province. The company hasn't found a buyer yet for the $27 million vessel, which is the biggest being built in China, but Managing Director Roger Liang believes there won't be any shortage of interest. China is "just like Russia five years ago. Suddenly Russia became a very important player, so this could happen to China," he said, a reference to billionaires such as Roman Abramovich, who owns at least three yachts. Yacht companies report that China sales started taking off two years ago, raising the possibility that some are being bought with improperly diverted stimulus money and bank lending that flooded the economy as part of government efforts to deflect the 2008 financial crisis. However, sailing experts say many are also being bought by young entrepreneurs who have made fortunes taking their companies public. China's yachting industry is still in its infancy but local governments are hoping for rapid expansion. The city of Tianjin is building a 9-billion yuan ($1.4 billion) yacht port that will be the country's largest, with 750 berths to accommodate luxury yachts up to 295 feet long, according to a report in the China Daily newspaper. Hainan Island on the southern coast, meanwhile, is being positioned as the Chinese Riviera. Qingdao, Xiamen and other ports along China's 9,000 mile coastline are also being developed to attract the yachting crowd. There's no shortage of wealthy Chinese with money to spend on luxury motor yachts, a notoriously expensive pasttime.

China has 875,000 millionaires and nearly half of them want to buy a boat, according to a survey last year by the Hurun Report, China's version of the Forbes Rich List Let your corporate image shine through. There is plenty of room for growth, with about 1,300 private yachts in China, according to figures cited by state media. In the U.S., the world's biggest yacht market, there are 17 million privately owned recreational boats, according to industry publication International Boating Industry. However, some sailing enthusiasts are skeptical and say China still has a long way to go before it can rival the superyacht's natural habitats of the Mediterranean or Caribbean. One problem is murky regulations that vary from province to province. Some cities have rules governing boat ownership and how and where they can be operated, while others don't. That makes it difficult for sailors to make longer journeys. Poor sailing infrastructure is also a problem, with relatively few experienced staff at a small number of marinas, some of which are located in the middle of industrial areas. Meanwhile, imported boats are subject to an import duty of at least 43% compared with about 15% for locally made watercraft. Some yachting experts believe the Chinese government is using the tax to help develop the country's fledgling yacht building industry. "The Chinese really want to control it, up to the point where probably their own industry has developed to a level that it can run by itself," said Bart Kimman, who runs a yacht management company based in Hong Kong. To get around red tape, Chinese yacht owners are buying and registering boats in Hong Kong, a special administrative region of China with a separate legal system. Albert Wu, general manager of the Gold Coast Yacht and Country Club, said an increasing number of his 220 berths are occupied by mainland Chinese-owned boats. Stiff duties don't seem to be deterring status-conscious Chinese from buying ships from established American and European boatbuilders. Frankie Chan, who traveled with his boss from Beijing to visit the show, was planning to buy five British-made Sunseeker boats. Chan is vice president of Oursjia, which rents out luxury cars and high-end furniture to 500,000 clients in 60 cities around China. About 10% of them have been requesting luxury yachts. The pair were inspecting two 60-footers that their company would take delivery of, including a sleek, black Predator model costing about 20 million Hong Kong dollars ($2.6 million). They also plan to buy three others that are at least 90 feet

long, and come fitted with flat screen televisions, full size fridges and a rear "garage" hatch to stow dinghies, jetskis and other toys. Chan and his boss plan to travel to Italy later in May to look for more boats to buy. Eventually, they want to have a fleet of 50 yachts from a range of brands based at marinas around China. "You can't compare with the European boats. If you talk about high-end boats, European boats are the best," said Chan. Gordon Hui, managing director of Sunseeker Asia, said that until two years ago, it had almost no sales to Chinese customers. Since then, he's sold about 25 boats to Chinese customers and the market now accounts for 8% to 10% of the company's annual production of about 200 yachts a year. Chinese shipyards are hoping to compete with their foreign rivals by undercutting them on price. Wong's company sells three yachts under the Accelera brand, including a 98-footer that sells for HK$38 million ($4.9 million). Wong reckons that's a quarter of the cost of a comparable American or European model. The company equips its boats with imported generators and other equipment but benefits from lower labor costs at its shipyard in Zhuhai, just over the border from Macau. Wong has sold some 10 vessels, including one to a company boss from China who paid his deposit of several million Hong Kong dollars in cash. "We couldn't it count it quickly enough, so we had to go buy a cash-counting machine," he said. Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

http://www.usatoday.com/money/world/2011-05-14-china-superyachts_n.htm

On Dec. 31st, 2009, Opinions of the State Council on Propelling Construction of Hainan as an International Tourism Destination was issued. The construction of Hainan as an international tourism destination becomes a major strategy of Chinese government, while yacht tourism becomes a major part for the international tourism of Hainan. The Opinions clearly presents the plan to research and perfect the yacht management measures, create conditions to expand the open water appropriately, provide quality services for the mooring of overseas yachts in Hainan, support the holding of international sailboat rally race in Hainan, actively promote the construction of yacht docks and develop the manufacturing industry of tourism equipment like yachts and light floatplanes. The policy support of Chinese government greatly promotes Chinese yacht industry. Through the development in recent years, Chinese yacht economy gradually becomes familiar to Chinese consumers. In the coming years, yachts will become an aquatic leisure activity and prosperous developing sport in China.

Chinas boat business has been picking up steam especially after Beijing specified leisure boating as a direction for tourism development. Several cities are vying to become Chinas Riviera, including Tianjin, Qingdao, Dalian in the north, Shenzhen, Sanya, Xiamen in the south, Shanghai and Hangzhou in the east. The number of marinas is expected to double to 60 by 2014. Regulators are working on cutting the red-tape involved in operating a boat. ( yacht industry news)
Its amazing to see how boating is now part of the new luxury lifetyle of the second generation of wealthy Chinese. This trend is growing very fast, said Pierre Gervois, CEO of China Elite Focus, a high end public relations agency targeting Chinese super-rich consumers

But a lack of proper of proper infrastructure support for boat owners could be a barrier to growth. Right now there is not enough standardised marinas, fueling and maintenance facilities, as well as qualified people to run them. China needs a mentor to improve infrastructure, we want to set up a school to train boating professionals here, says Eriberto Morsanuto, Asia country manager of Nettuno Yachts.

In the coming few years, yachting will become a thriving recreational activity in China, said Haikou Mayor Xu Tangxian. Governments of coastal cities should work out development plans for yachting tourism in time.

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Chinas shipyards brace for downturn

By Leslie Hook in Beijing Published: March 14 2011 20:09 | Last updated: March 14 2011 20:09

Choppy waters: Yards may have to spend more on building complex ships

Not long ago Zhang Zhirong, a successful young property tycoon in Shanghai, decided to try something new: shipbuilding.

In 2005, he started building his first shipyard. A mere three years later, he delivered his first ship, setting an industry record for China. Mr Zhangs company, Rongsheng, was on its way to becoming the sixth largest shipyard in the world, the position it occupies today.

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The rapid rise of Rongsheng, which raised $1.8bn in a Hong Kong IPO last year, underlines the meteoric expansion of Chinas shipyards. Ten years ago, China built less than 10 per cent of the worlds ships. Today, it is the worlds largest builder, measured by deadweight volume.

Mr Zhang, and entrepreneurs like him, have ridden this wave, which has given birth to shipping magnates

such as Simon Liang of Sinopacific and Ren Yuanlin of Yangzijiang. Mr Zhang, 41, is now on the Forbes billionaire list at number 374, and lives on Hong Kongs leafy and secluded Bowen Road. Chinas shipyards did not grow so quickly by chance. They were fuelled by the shipping boom just before the global financial crisis, and have given their Japanese and Korean counterparts a run for their money by offering lower costs, as well as attractive financing for foreign ship buyers.

Those incentives were a powerful catalyst during the economic downturn, when global liquidity dried up and ship buyers sometimes defaulted on payments. Chinas yards have also been boosted by growing numbers of Chinese shipowners who prefer to buy domestically. Some analysts see the shift as a strategic move for China. The history of shipbuilding for the last 150 years has been about commodity dependent nations, says Jon Windham, analyst at Barclays Capital in Hong Kong. China is by far the single largest driver of bulk commodity demand today. So from a strategic point of view, the government decided that for their own national security they needed to become a shipbuilding nation.

That decision translated into a boost for the industry in 2009, when the government announced a three-year stimulus programme for Chinese yards, encouraging banks to lend to shipbuilders hit by the crisis, and also to provide credit to foreign ship buyers.

The goal, according to the stimulus announcement, was for Chinese yards to control 10 per cent of the global offshore engineering market by 2011. China ExIm Bank provided credit lines of Rmb160bn ($24bn) to Chinas two biggest state-owned yards alone, in addition to separate loans to other companies.

The government was also eager to encourage shipbuilding because it supports a whole host of other industrial activities, from steel mills to maritime engineering. Chinas yards have also been able to succeed because they are extremely competitive on cost.

While there are some complex ships, such as LNG (liquefied natural gas) carriers, which have yet to be produced in China, most Chinese yards have perfected the more simple bulk carriers used to carry things such as coal or iron ore, and they now dominate production in that market. However, with the global shipbuilding industry falling into the doldrums, Chinas massive shipbuilding complex is starting to look a little like a house of cards. Higher steel prices, overcapacity and very low global bulk rates have hurt shipyards margins, and analysts are divided on how Chinese yards will weather the downturn. I would not be surprised if more than 100 small [Chinese] yards went bankrupt in the next two to three

years, says Zhou Jiliang, head of new building for Clarksons Shanghai. It will not have a big impact on the industry, though, since most of the big yards, which account for about 85 per cent of Chinas capacity, will be all right.

According to Mr Zhou, the changing market will force Chinese yards to spend more on research and development in an effort to become more efficient and produce more of the most complex types of ships, such as LNG carriers. Others paint a more grim picture. The shipbuilding industry of China is actually a sandcastle, says Sokje Lee, senior analyst at Mirae Asset Securities. Nobody cares about the real profit figures of Chinese yards. When they have continued new orders, it is easy to hide. But without orders they will see easy cash drain. Generally speaking, I doubt the real profitability of Chinese yards. He believes they will be hard hit by rising labour costs in China and by higher global steel prices. A big question is the impact of Chinas credit tightening, and whether the governments efforts to cool the economy will result in fewer loans to strategic industries, such as shipbuilding. Mr Zhangs company, Rongsheng, has seen its share price see-saw since it listed in November, underlining the uncertainty the sector faces.

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