Facts are stubborn things, but statistics are more pliable," to quote a perspicacious but unknown author. There is no shortage of statistics surrounding the Chinese yachting industry at the moment. China ranks among the top 10 builder nations for new builds larger than 80 feet. The export value of leisure boats in 2006 was valued at $180 million, and the domestic boating market was valued at $30 million—a 40 percent increase over 2005 (source: Marine Dragon Consulting). These figures show that China is already firmly established as a low-cost production base for overseas boatbuilders. When combined with a booming luxury goods market that is already the third largest in the world, the country looks to be on course to become one of the hottest new markets for the boating industry.

The above numbers highlight the huge disparity between the export and domestic markets in China. While this article is concerned with the former, the problems facing the domestic market are likely to affect the industry as a whole for some years to come. There is no yachting culture in China and no infrastructure to speak of. Fewer than 10 marinas are operational (although more than 40 are at varying stages of development), and the status of yachting is totally unregulated. The Chinese Yachting Association (CYA) is working to remedy the situation, but this administrative headache will remain a major obstacle to the growth of mass yachting in China. All these issues have a bearing on production for export. How can Chinese boatbuilders be expected to meet the exacting standards of an American or European clientele when they have never actually seen a luxury yacht and have little or no concept of what yachting is all about?

The answer is to bring in outside help, and this is precisely what the leading yards in China are doing. Shanghai-based Marine Dragon Consulting has identified, of the 250-odd boat manufacturers in China, about 50 export-oriented manufacturers focusing on production boats. Of these, nearly all of them have some sort of foreign input in the form of expert consultants, joint ventures where the foreign partner injects the technical and marketing know-how or Wholly Owned Foreign Enterprises (WOFE). This is also a question of image and branding, and Chinese state-owned boatyards face an additional challenge in convincing the overseas market to buy their products. Even state-owned Shanghai Double Happiness Yacht (DHS), which ranks among the top 10 Chinese yards in terms of exports with more than 100 yachts delivered to date, has partnered with French Cortenzo Yachts and Italian Gianetti Yacht to serially produce 25- to 30-meter luxury motor yachts. There is no doubt that this foreign input has been instrumental in shifting the volume-driven Chinese mentality to focus more on quality.

Top: The Double Happiness canteen. Bottom: The mold shop at the Ocean Alexander shipyard on the Yangtze River. (Click images to enlarge)

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It comes as no surprise to learn that Taiwanese investors dominate the WOFE, accounting for as much as 70 percent of building investment and activity in China. The Taiwanese have been building yachts since the early 1960s and with their experience and common language were quick to cash in on China’s cheap labor pool and real estate opportunities. Hampton Yachts, for example, was one of the first Taiwanese boatbuilders to set up in Shanghai in 1992. Chairman Jeff Chen comes from a family that has been building the Formosa series of production yachts in Taiwan for more than 40 years. This experience has paid dividends in China where Taiwanese foremen oversee the construction of the 55- to 74-foot range of Hampton pilothouse yachts designed in collaboration with naval architect Howard Apollonio.

Fellow Taiwanese John Chueh heads the Ocean Alexander family shipyard near Shanghai, where there continues a 30-year collaboration with American designer Ed Monk Jr. to build pilothouse motor yachts from 46 to 58 feet (with plans to add a 66- and 68- footer this year) and a Taiwanese plant that builds larger models up to the top-of-the-range 98-foot cockpit motor yacht. Before setting up his own plant on the Yangtze River Delta in 2003, Chueh subcontracted another company to build in China, but the venture proved a failure mainly because the completed boats did not meet Ocean Alexander’s standards of quality. Today, Chueh has reverted to in-house construction and engineering and limits the company’s growth so as to keep a tight check on quality control.Significant exceptions to this Taiwanese dominance include two U.S. companies: Brunswick and Marlow Yachts-Norsemen Shipyard. Brunswick has sold 400 units to Chinese clients—more than any other company—and started producing its Sea Ray 175 in China.

David Marlow is chairman and the majority shareholder (but the only Westerner) in the partnerships that own Marlow Yachts-Norsemen Shipyard, which exports the majority of its ABS, Lloyd’s Register and ISO 9001-compliant Prowler and Explorer series to the United States, while keeping an eye on the emerging domestic scene. Unlike similar companies in China, Marlow set the bar for environmental manufacturing practices in 2003 when the Xiamen facility was built and went on to win the World Superyacht Environmental Award in 2006. Marlow also believes that the common perception of Chinese products as being inferior is often misplaced, pointing out that many components fitted aboard some of Europe’s finest yachts are Asia-supplied.

Top: A sailboat in build at the Hansheng plant. Bottom: A joiner at the Yihong yard. (Click images to enlarge)

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Company Director Martin Lo reckons that building in China represented at least a 20 percent cost savings to the German client. The shipyard moved from Hong Kong in 1999 to its present site near Zhuhai in Mainland China, relocating its skilled foremen in the process. Cheoy Lee continues to build everything from ferries and tugboats to one-off custom motor yachts, such as the Frank Mulder-designed, 172-foot SeaShaw, launched in 2004. With a tank-testing facility nearby at Guangzhou University, its own metal cutting and bending plant, propeller tuning facility and full-size lofting shop, Cheoy Lee is able to build to any class in steel, aluminum or fiberglass.

"The perception is that Chinese build means lower quality," says Kingship consultant Phillip White. "We go to a lot of trouble to refute this conception. Of course, we could build more quickly and more cheaply, but our mantra is to provide high quality as standard."Last year, Swiss yacht management company Floating Life International oversaw the delivery of a 45-meter expedition yacht for an Italian client from a commercial yard near Yantai in Shandong Province, reportedly at the knockdown price of $6.5 million. And at the 2007 China Boat Show in Shanghai in April, the Mega Yacht Group, a joint venture between Wuhan Nanhua High-speed Ship Engineering and Cavendish White, presented plans for a range of superyachts up to 100 meters. Steel cutting started in July on the first 67-meter yacht, codenamed Project Midas. The vessel will be built to Lloyd’s and MCA certification. Nanhua High-speed Engineering is a former commercial shipyard, and its transition to private yachts is unlikely to be straightforward.

Top: The Ocean Alexander yard. Middle: Security staff. Bottom: A steel hull at Kingship. (Click images to enlarge)

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As to whether owners should look to build a custom superyacht in China, my answer is, "Why not?" I was positively surprised by the cutting-edge facilities and equipment during my tour of a dozen yards across the country. The skills are already in place and, with expert guidance from outside consultants, can only improve in the future. Having said that, there is a downside to building in China for the unwary that should not be overlooked. The legal framework, where it exists, is tortuous, and domestic business partners must be chosen with care. As in other Chinese industries, counterfeiting is not unknown, and some methods of low-cost mass production are inappropriate for foreign investors who have international reputations to maintain.

One cautionary tale is that of American-owned CMI, which was contracted to build six 110-foot steel yachts in 2004. Within 18 months after subcontracting the Huangpu Shipyard to carry out the work, CMI declared bankruptcy and $90 million of investment disappeared down the drain with nothing to show for it but six rusting hulls.

There are cost-effective opportunities out there for prospective owners who are willing to venture into an exciting economic and cultural environment that does not yet possess the experience and pedigree of the American or European yachtbuilding industry. The best advice to adventurous investors would be to approach the table like savvy poker players—armed with knowledge, diligence and patience.