It is believed that the Chinese have a different perception of yachting compared to Europeans since they have not been exposed to it for a long time, lacking the necessary knowledge and experience. However, as time passes, the Chinese empire is starting to participate in water sports and recreation.
Despite the abundance of information available about China, much of what is happening in the country remains a mystery to us. We have tried to explore how the yachting industry on the mainland is faring, without touching on specific topics like Taiwan and Hong Kong, which merit a separate discussion.
Surprises in China
The number of affluent people in China is rapidly increasing. In 2013, China ranked second globally in terms of the number of millionaires – 2,378,000 people; an 82% increase from the previous year. Furthermore, half of these millionaires, according to research by Barclays and Ledbury Research, plan to move to other countries over the next five years, with less than 1% of them purchasing yachts. There are several reasons for this relatively low demand, including a negative attitude towards yacht purchases due to national culture, high taxes (up to 40% on imported vessels), and weak yacht legislation. Additionally, not every location is suitable for yachting, with coasts and large rivers heavily polluted and congested with commercial and other vessels. As such, many people prefer to keep their boats in Hong Kong, where the infrastructure is more developed.
Between 2006 and 2010, China’s yachting industry grew from virtually nothing to $3.4 billion (a 732% increase). There is a rapidly growing middle class in the country (15% of the working population, with 1% annual growth), and while many of these people cannot afford Rolls-Royces, they are interested in yachts and tend to purchase relatively inexpensive locally produced models costing $80-160 thousand.
At exhibitions, European shipyard and designer representatives have noted that the Chinese use yachts differently from Europeans. They are not inclined towards long cruises or accommodation on board, and yachts serve primarily for entertaining friends and business clients. Salons are used for karaoke, dancing, board games, and cinemas. As such, local preferences regarding layouts and design are quite distinct. After having fun, the Chinese typically go home and do not spend the night on board their yachts.
China also faces the issue of its reputation as a manufacturer of cheap consumer goods. Not all potential buyers are prepared to accept that their luxury yacht is made in China. Although the quality of Chinese boats is not always satisfactory by European and American standards, local shipyards are steadily improving in this regard, including by seeking the expertise of foreign specialists. Conversely, there are people who are willing to compromise on interior detailing but get a yacht that is longer than what can be built in Europe for their money. Despite this, China has already entered the top ten countries producing yachts over 24 meters long and is actively creating new brands with its own design, closing the gap with Europe not only in quality but also in price.
Market Conditions
Currently, the combined yacht market of Europe and the United States accounts for 95% of the world market. Although China recovered more quickly than the Old and New Worlds from the economic crisis of 2008, many large manufacturers believed that massive expansion into Asia would help them weather hard times. However, the growth of the yacht market in China began back in 2005, and by 2020, its turnover should reach $10 billion (about 100,000 yachts) according to the most conservative estimates, and up to $30 billion according to the most optimistic estimates. The question is whether this country can achieve it.
In 2013, China declared it the Year of Marine Tourism. The development plan for this industry emphasized the formation of yachting and related infrastructure. At that time, only about 3,000 yachts were registered in the country, which meant one vessel for every 452,000 people. For comparison, in Italy, this ratio is 1:100. However, it should be noted that due to imperfect legislation, a significant number of unregistered yachts are “living” in China.
China’s GDP growth has been declining over the past three years and stood at 7.4% in 2014, but the government sees this generally negative trend as an opportunity to take a breath. Among other factors, the introduction of an austerity regime in state-owned companies and anti-corruption programs has contributed to a slight decrease in the growth rate of the yacht market in China in recent years. Interestingly, some market players are happy about this because they believe that the industry will have time to comprehend what has been achieved, and people will have time to learn yachting.
At the same time, every year, the market is becoming increasingly fragmented. It is now more important for the Chinese not just to own a yacht (often for no particular reason, more to demonstrate status) but to purchase a vessel according to their needs, whether it is a fishing, racing, or pleasure boat. They are beginning to understand that, for example, an expedition yacht makes it possible to circumnavigate the world, and a catamaran can accommodate more guests. Against the backdrop of “status” owners, more and more people who fall in love with the ocean gradually acquire a boat to be closer to nature.
Manufacturing Sector
China’s yachting market is primarily driven by production, which is outpacing still-weak demand many times over. Just 15 years ago, the only “yachts” that were built in China were fiberglass river boats for transporting tourists, with no special interiors, master cabins, or other “excesses.” Today, the country, which is one of the three leaders in the world in commercial shipbuilding, has more than 300 shipyards that mainly build inexpensive boats up to 9 meters long. Small and medium-sized companies, in addition to pleasure yachts and boats, produce fishing trawlers and fast boats for work purposes. The absence of a narrow yachting specialization allows them to quickly switch during global economic upheavals, for example, to government orders while maintaining staff, production, and income. Whenever possible, they try to increase the length of their vessels, but the lion’s share of sales is still small (7–15 meters). Those shipyards that build exclusively yachts either belong to the state or foreigners. Today, the largest cluster of yacht shipbuilding is located in the city of Pingsha. Zhuhai Pingsha Yacht Industrial Park, founded in 2002, already has about 60 shipyards and component manufacturers.
As for foreigners, factories of about 50 foreign brands are located in China because production costs there are 20-30% lower than in Europe or the USA. Many outboard motor manufacturers, including Mercury Marine, Suzuki, and Yamaha, have long established their own facilities in China. In 2005, the Brunswick Corporation invested $12.6 million in a plant in Zhuhai, where the production of Sea Ray boats began (with 90% of the materials supplied from the USA).
In addition to shipyards, manufacturers of yacht components are growing by leaps and bounds in China. However, key components and assemblies, such as engines, are mostly imported as customers want to see brand-name equipment with developed service on their boats.
The trend toward Chinese production in the yachting industry is not just about cost savings. Some of the most renowned naval architects and designers have started collaborating with Chinese shipyards. For instance, the famous Dutch naval architect, Guido de Groot, has completed several projects with China’s Horizon Yachts. Meanwhile, Benetti, the Italian yacht builder, recently delivered a 50-meter yacht, FB703, built at the Benetti shipyard in Livorno, Italy, but designed for a Chinese owner. This could signify a shift from producing low-cost yachts for export to building high-end custom yachts for the domestic market.
In conclusion, while the Chinese yachting market is still in its early stages, the country’s potential as a major player in the global yacht industry cannot be ignored. Although demand has been relatively weak, production has continued to grow at a steady pace, and many manufacturers believe that investing in the Chinese market will pay off in the long run. As the Chinese become more knowledgeable about yachting and develop a greater appreciation for the sport, the country’s yachting industry is likely to experience significant growth in the coming years.
Import and Export
The yacht industry’s import and export volume in China grows every year, with over a hundred foreign brands being promoted by local dealers. Italy, the United Kingdom, and France are the leading exporters of pleasure craft to China.
European companies understand the potential of the Chinese market and are aware that it may not bring them significant profits in the short term. However, they aim to stake out a place and maximize brand awareness in preparation for the time when growth reaches its peak. Some companies have gone beyond simple marketing, such as the Italian Mondo Marine, which acquired a stake in the Chinese shipyard Sease Yacht Co. Ltd, making Sease Yacht a dealer for Mondo Marine and involved in the construction of three fiberglass yachts ranging from 54 to 88 feet.
The reverse process is equally intensive, with powerful Chinese corporations taking advantage of the 2008 crisis and actively buying up liquid assets in the US and Europe. This trend has fully affected the yachting industry. The Ferretti Group was the first major acquisition, with 75% acquired by the Shandong Heavy Industry Group – Weichai Group, followed by Sunseeker Yachts, which Dalian Wanda Group bought for €320 million, and Sanlorenzo, of which Sundiro Holding Group bought 22.99%, investing €20 million.
Every year, more Chinese companies participate in international exhibitions, though some European market participants still view them with suspicion. The Chinese International Boat Show (Shanghai) is considered the main one in China, followed by the exhibition in Hainan, which is the main event for superyachts in Asia. In addition to these, there are about 40 regional exhibitions.
State and Yachting
Seven years ago, China lacked a unified legislative framework governing the registration and operation of pleasure yachts. Since then, the state has taken important steps, such as the Chinese Classification Society adopting a set of rules in 2008 to certify and classify pleasure craft for subsequent registration. Many provinces now allow the registration of yachts owned by non-residents, and Hainan Island has become one of the most open and free-water areas in the country.
The issue of standardizing the training of yachting professionals and improving navigation safety on pleasure yachts is quite acute in China. The introduction of uniform standards for the licensing of boat masters in 2001, and the recognition of foreign “rights” with a procedure for obtaining a national license based on them, has been a relief to many owners. Significant progress has also been made in the field of vocational education, with Chinese manufacturers initiating a dialogue with technological universities about conducting specialized courses. Shanghai Jia Tong University, Maritime University, and Huazhong University have responded to the call and are interested in developing specialized training programs.
Yachting Infrastructure in China
Mainland China has abundant yachting opportunities, including 90,000 lakes, 6,500 islands, and 18,000 km of coastline. The number of marinas is increasing every year, with existing ones expanding capacity, and large yacht clubs are seeking membership in prestigious European organizations, such as the Yacht Club Monaco. However, some marinas are built to increase the value of the adjacent real estate, rather than addressing yachtsmen’s needs for mooring places. Despite the high cost of membership, owners do not always receive direct profits.
Hainan Island is one of the most appealing destinations for wealthy people due to its developed yachting infrastructure and excellent climate. About 40% of China’s registered yachts are located in the prestigious Hainan marinas.
Qingdao in the Shandong province on the coast of the East China Sea is also a valued destination for yachting. Ten years ago, yachts were not known in this city, but it now hosts the stages of the Volvo Ocean Race and Clipper Race. Haier, a major consumer electronics retailer headquartered in Qingdao, owns several corporate boats, including the Sunseeker 88, which is used exclusively for business receptions or as a mobile office.
Yachting is also becoming popular in the business environment as a team-building program, as it requires participants to demonstrate leadership qualities and the ability to think and act in difficult conditions, which is typical for the sport. Since 2007, China has actively developed sailing, and it hosts the international regatta CCIR (China Cup International Regatta); in 2014, 103 teams from 30 countries participated in the event, including Russia.
Chinese wisdom says that time is the best assistant in any business. The Chinese are gradually moving forward, and we are witnessing new developments in the yachting industry. East and West have already exchanged yachting embassies, and they have put forward their vanguards, waiting for the main forces to set in motion. When this happens, the world will witness the rise of Chinese yachting. For now, everything is just beginning in the Middle Kingdom.
