China will shape shipping’s green future more than the west admits
| Mark A P Williams |
| Apr 8 |
One of the oddities of the shipping decarbonisation debate is that it is often framed as though the future will be designed in Brussels, agreed in London, financed in New York and politely adopted by everyone else. That is not how the shipping industry works in the 21st century. If shipping is going to decarbonise, then China will have a significant say in how, how fast, and by when it decarbonises. This is the industrial reality.
The shipping industry is heavily dependent on China for the new ships it needs to decarbonise. By 2022 China had already overtaken Greece as the world’s largest ship owner and was the leading shipbuilder, with around 45% of global shipbuilding market share, well ahead of Japan and South Korea. By 2025 China had around 67% shipbuilding market share, with Japan and South Korea taking up much of the remainder. Add up the tonnage owned directly in China or via overseas listed companies including those in Hong Kong, and China Inc controls around 25% of combined tanker, bulker and container shipping tonnage.
This of course came to the attention of the Trump administration in 2025 and led to its policy attempts to support US shipbuilding and operation, with limited success. Europe has not bothered to take the opportunity to support its sunset shipbuilding industry by diverting decarbonisation funds into actually building low-emission vessels, at least not on a commercial scale. India is trying again to get into shipbuilding to ride the wave of vessel demand, as have some Middle East countries, but none has replicated China’s success.
This matters because decarbonisation is not an abstract aspiration. It is a physical reconstitution of the entire world fleet of commercial and non-commercial vessels. Somewhere, somebody has to design, finance and construct the ships that will replace today’s tonnage. Somebody has to build methanol-capable vessels, ammonia-ready ships, dual-fuel engines, new tank arrangements, new onboard safety systems and whatever else emerges as commercially viable over the next two decades.
In practical terms, a large share of that industrial work will run through Chinese yards. This is one reason the transition will not be determined by shipping companies alone. The Chinese shipbuilding industry is not just large. It is also shaped by state influence. Much of the sector is in state hands, with some foreign-invested yards also active and a few previously inactive yards returning as demand improved. That means China has a policy lever that many Western economies no longer possess to the same degree: it can align industrial strategy, shipyard capacity, research priorities and state-owned shipping groups in a single direction if it chooses.
If Beijing decides that low-carbon shipping technology is strategically important, it can do more than issue worthy statements. It can steer capital. It can lean on state-owned enterprises. It can encourage domestic collaboration between yards, engine makers, fuel suppliers, ports and operators. China can absorb a degree of early-stage inefficiency or uneconomic investment for longer than a purely market-driven system might tolerate. For example, when China Merchants Energy Shipping and COSCO Shipping Bulk cooperate on methanol and other low-carbon fuel programmes, they indicated the scale advantage that China enjoys as it turns pilot projects into industrial policy.
Europe, by contrast, often talks as though regulation is enough. Regulation matters, of course. Carbon pricing, fuel standards, emissions reporting and port rules all shape behaviour. But regulation is not the same thing as industrial capacity.
In 2024, China and the International Chamber of Shipping proposed a “fund and reward” system to incentivise uptake of alternative low-carbon fuels. The idea was that a mandatory carbon levy on fuel oil purchases would not simply disappear into a general research pot, but would instead reward early adopters of cleaner fuels. The proposal referenced a USD 150 per tonne contribution on fuel oil purchases.
On the face of it, it the proposal was sensible. New fuels are expensive. First movers face real commercial risk. If the world wants shipowners to order more expensive vessels and burn more expensive fuels, then someone has to help bridge the cost gap.
But the proposal came with a sting in the tail. Who would benefit most from a reward system? Probably the biggest companies, the best-capitalised players, and those with the balance sheet to move first. In practice, that could mean large corporates, including Chinese state-owned enterprises, receiving support funded in part by a levy borne across the wider industry. Smaller independent owners might reasonably conclude that they were being taxed to subsidise their larger rivals.
The industry moved on to the IMO proposal shot down by the US, Saudi Arabia and other petrostates last October. But the China-ICS proposal was at least being honest about what decarbonisation often means in practice: consolidation, scale advantages, and a transfer of market power towards the largest and best-connected players.
Shipping likes to imagine itself as a ruggedly entrepreneurial industry full of hard-headed independents. Much of it still is. But the decarbonisation era favours a different model based on corporatisation: larger fleets, closer ties to industrial policy, more complex financing structures, and operators that can absorb compliance costs, technical risk and long payback periods. On that measure, China begins the race with some obvious advantages, not only because it builds ships but because China sits at the centre of global trade itself.
During the recent conflict in the Middle East, China has maintained a steady diplomatic line based on the rule of law and importance of diplomacy. This masks its position as the world’s biggest ship owner, the biggest goods exporter, the biggest importer of oil, LNG, coal and iron ore, and the leading shipbuilder. That is an extraordinary concentration of influence. It means that developments in China’s economy, environmental policy and industrial priorities are likely to have broad and lasting effects across global shipping markets.
If for instance China feels, despite its “string of pearls” naval bases protecting its energy supply chains from the Middle East, that it remains too dependent on fossil fuels, it is in a unique position to accelerate its energy transition to hydrogen-based fuels.
We already know that when China slows, shipping feels it. When China stimulates, shipping feels it. So, if China pushes green technology harder, shipping will feel that too. If China decides to combine decarbonisation with a broader strategic reshaping of supply chains, trade routes, ship design or industrial geography, then the consequences will not stay inside China. They will ripple out through freight markets, ship ordering, commodity flows, port investment and fleet values.
This is why I remain sceptical of the European habit of discussing shipping decarbonisation as a primarily moral or regulatory challenge. Because, as the US has come to understand recently, it is also a question of power.
Who makes the next generation of ships? Who makes the engines? Who makes the fuel? Who finances the early losses? Who gets rewarded for moving first? Who can turn an expensive transition into an industrial opportunity? And at the moment, China looks better placed than most to answer these questions at scale.
That does not mean China will “solve” shipping decarbonisation. No country can do that alone. The fuel challenge is too large, the technologies too immature, and the global fleet too varied. Anyone serious about the subject needs to spend less time speaking as though Europe can direct the transition by conference panel, and more time watching what Chinese yards, Chinese owners and the Chinese state are actually doing.
In the end, shipping will not decarbonise through aspiration alone. It will decarbonise through steel, engines, fuel systems, state support, and industrial execution. As a consequence of the way it has built its economy since the 1980s, China is best placed to lead the way to net zero.
The next question, though, is just as uncomfortable.
What if shipping cuts emissions not only by changing fuels, but by doing less shipping in the first place?
That is the topic for part 4 of this series, out on Monday.
