China Ship Fund, the first investment fund for the Chinese shipping industry, began operations in Tianjin yesterday, mainly to support an industry caught in the middle of the economic slowdown.

It was one of the ten approved industry funds by the National Development and Reform Committee.

The fund is expected to be valued at 20 billion yuan and will be used to purchase ships and rent them to domestic carriers.

With demand for domestic and international transport of oil and gas in China expected to continue to rise, the fund targets investment in large-scale, specialized ships used to transport liquefied natural gas, liquefied petroleum gas and also semi-submersible vessels.

The fund also plans to purchase similar ships from other countries to alleviate the deficiency.

Investment in these specialized ships is highly profitable, according to Li Kejun, chairman and president of China Classification Society - a leading domestic ship classification and inspection services provider.

"I'm sure the fund will extend its business to wider fields in the future, but for now it will be easier to persuade investors, given these ships sell well in the market and are more profitable," he said on the establishing ceremony held in Tianjin yesterday

Zhang Guangqin, head of the China Association of the National Shipbuilding Industry, said the sector has hit bottom and it is time to invest, but that 20 billion yuan is far too little to spur growth and integration across the industry.

"Even 200 billion yuan is not enough to boost shipping," he said.

In the first nine months of this year, new orders received by China's shipbuilding yards were 16.9 million deadweight tons, a massive 70 percent drop from 57.2 million tons in the same period last year, data from the association showed.

From October 2008 to October 2009, orders for 185 ships, 6.77 million deadweight tons in China, were canceled.

Experts predict over 40 million tons of freight container and bulk cargo capacity will enter the global market in 2010.