China will encourage more foreign investment in its shipbuilding industry but will restrict to 49 per cent, according to the latest official blueprint for the industry.

"Foreign shipbuilders are allowed to reorganize, acquire or jointly fund shipbuilding enterprises  provided they hold no more than 49 per cent of the shares," according to the National Medium and Long-term Plan for the Shipbuilding Industry.

The same rules include medium and low-speed ship diesel engine manufacturing enterprises and crankshaft manufacturing enterprises.

Sino-foreign joint ventures must set up a technical centre to absorb technologies transferred by foreign investors, the plan said.

It was published by the  State Commission of Science, Technology and Industry for National Defence, which administers shipbuilding affairs in China, and the National Development and Reform Commission, China's top industrial planning body.

As for manufacturing advanced products needed for ships, China will encourage foreign investors and public investment, it said.

"Last year foreign investment in China's shipbuilding sector reached US$220 million, an increase of 45 per cent on 2004," said Nie Lijuan of the China Association of the National Shipbuilding Industry.

"Although the figure was comparatively small," she said, "foreign companies have sped up construction of some shipbuilding plants and some component manufacturing facilities."

China has become the world's third-largest shipbuilder in terms of output, following Japan and South Korea. In 2005 China's shipbuilding output was over 12 million deadweight tons (dwt), approximately 17 per cent of the global market.

Also underlined in the plan were product development and technological improvement.

Under the plan, annual output will hit 17 million dwt by 2010.

The plan also said that more than 60 per cent of ship equipment will be produced locally by 2010.

To realize these objectives, China will speed up construction of three key shipbuilding bases in the Bohai Rim, the Yangtze River Delta and the Pearl River Delta.

"This year the shipbuilding industry has continued to grow rapidly, with new orders hitting 16.08 million dwt in the first half of the year, an increase of 113 per cent over the same period last year," said Nie.

"More than 70 per cent of these new orders are for exports, with State-owned shipbuilders accounting for over 70 per cent of exports," she said.

(For more biz stories, please visit Industry Updates)